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. 5
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 6
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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:
Wade Bridge
Integrated 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, 2000 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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PART C
------
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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PROSPECTUS
August 1, 2000
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.
INVESTMENT ADVISOR
Pinnacle Advisors LLC
4605 E. Genesee Street, DeWitt, New York 13214
This Prospectus has information about the Fund that you should know before
investing. Please read it carefully and retain it for future reference.
TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY .......................................................
EXPENSE INFORMATION .......................................................
ADDITIONAL INVESTMENT INFORMATION..........................................
OPERATION OF THE FUND .....................................................
HOW TO PURCHASE SHARES.....................................................
SHAREHOLDER SERVICES ......................................................
HOW TO REDEEM SHARES ......................................................
DIVIDENDS AND DISTRIBUTIONS ...............................................
TAXES .....................................................................
DISTRIBUTION PLAN .........................................................
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE ......................
FINANCIAL HIGHLIGHTS ......................................................
For Information or Assistance in Opening an Account, please call: Nationwide
(Toll Free) 1-888-899-8344
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RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide long-term capital growth.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
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("New York Securities"). At
least 90% of the Fund's total assets will normally be invested in equity
securities with at least 65% invested in New York Securities.
The Advisor uses fundamental analysis to identify securities with potential for
capital appreciation. The Advisor focuses on companies projecting above average
earnings and revenue growth, as compared to market averages (S&P 500). For
example, if the S&P 500's projected rate of growth is 10% for the year, the
Advisor will select companies projecting greater than 10% earnings and revenue
growth for the same period. Also, the Fund invests in companies the Advisor
believes to be undervalued by the current market. The Fund buys shares in
companies of all sizes, and although emphasis is placed on larger companies,
small and medium sized companies may makeup a significant portion of the Fund's
portfolio.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The return on and value of an investment in the Fund will fluctuate in response
to stock market movements. Stocks and other equity securities are subject to
market risks and fluctuations in value due to earnings, economic conditions and
other factors beyond the control of the Advisor. As a result, there is a risk
that you could lose money by investing in the Fund.
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.
Small and mid-sized companies may expose the Fund to greater risk 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 and mid-sized companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of
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their trading is substantially less than is typical of larger companies.
Therefore, the securities of smaller and medium sized companies may be subject
to wider price fluctuations.
As a non-diversified fund, the Fund may invest greater 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. This fluctuation, if
significant, may affect the performance of the Fund.
PERFORMANCE SUMMARY
-------------------
The bar chart and performance table shown below provide an indication of the
risks of investing in the Fund by showing the performance of the Fund and by
comparing the average annual total returns with a broad measure or market
performance. How the Fund has performed in the past is not necessarily an
indication of how the Fund will perform in the future.
BAR CHART
26.80% 25.12%
1998 1999
During the period shown in the bar chart, the highest return for a quarter was
22.75% during the quarter ended December 31, 1998 and the lowest return for a
quarter was -10.16% during the quarter ending September 30, 1998.
Sales loads are not reflected in the bar chart. If these sales loads were
reflected in the bar chart, the returns would be less than those shown.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1999*
Since
One Inception
Year (May 12, 1997)
---- --------------
New York Equity Fund 19.18% 22.12%
Standard & Poor's 500 Index** 21.04% 25.54%
* The Fund's year-to-date return as of June 30, 2000 is 16.10%,
** The Standard & Poor's 500 Index is an unmanaged index of common stock
prices of 500 widely held U.S. stocks.
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EXPENSE INFORMATION
-------------------
This table describes the fees and expenses that you will pay if you buy and hold
shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge Imposed on Purchases
(as a percentage of offering price)............................. 4.75%
Maximum 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 $13. See "How to Redeem
Shares."
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees ................................................ 1.00%
Distribution (12b-1) Fees ...................................... 0.16%
Other Expenses ................................................. 1.58%
-----
Total Fund Operating Expenses .................................. 2.74%*
=====
*The Advisor currently intends to waive fees and continue to reimburse Fund
expenses in order to maintain total Fund operating expenses at or below
1.98%. However, this arrangement may be terminated at any time at the
option of the Advisor.
EXAMPLE:
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year $ 739
3 Years 1,285
5 Years 1,856
10 Years 3,400
ADDITIONAL INVESTMENT INFORMATION
---------------------------------
The Fund seeks 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
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significant investment consideration and any such income realized should be
considered incidental to the Fund's objective. Through fundamental analysis the
Advisor attempts to identify securities and groups of securities with potential
for capital appreciation. 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). 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. 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: (1) 50% or more of
its profits are generated from operations (including plants, offices or a sales
force) based in New York or (2) 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.
As a temporary defensive measure, 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.
OPERATION OF THE FUND
---------------------
The New York Equity Fund is a non-diversified series of The New York State
Opportunity Funds, a registered open-end management investment company.
The Trust retains Pinnacle Advisors LLC, 4605 E. Genesee Street, DeWitt, New
York 13214 (the "Advisor"), to manage the Fund's investments. 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.
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Gregg A. 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. He worked with Smith Barney from 1986 to 1995.
HOW TO PURCHASE SHARES
----------------------
INITIAL INVESTMENTS. 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, c/o Ultimus Fund
Solutions, P.O. Box 46707, Cincinnati, Ohio 45246. 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.
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.
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Initial Sales Dealer
Charge as % of: Reallowance
--------------- as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
-------------------- ----- -------- -----
Less than $50,000 4.75% 4.99% 4.00%
$50,000 but less than $100,000 4.00 4.17 3.25
$100,000 but less than $250,000 3.25 3.36 2.75
$250,000 but less than $500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 1.50 1.52 1.00
$1,000,000 or more None None
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.
REDUCED INITIAL SALES CHARGE. You may use the Right of Accumulation to combine
the cost or current net asset value (whichever is higher) of your existing Fund
shares with the amount of your 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. You should contact the Transfer Agent for information about the Right
of Accumulation and Letter of Intent.
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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 proceeds were
redeemed from the other fund no more than sixty days prior to your purchase of
shares of the Fund. To make a purchase at net asset value pursuant to this
provision, you must submit photocopies of the confirmations (or similar
evidence) showing the purchase and redemption of shares of the other fund. Your
payment may be made with the redemption check representing the proceeds of the
shares redeemed, endorsed to the order of the Fund. The redemption of shares of
the other fund is, for federal income tax purposes, a sale on which you may
realize a gain or loss. These provisions may be modified or terminated at any
time. Contact your securities dealer or the Transfer Agent for further
information.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase shares of the
Fund at net asset value. To the extent permitted by regulatory authorities, a
bank trust department may charge fees to clients for whose account it purchases
shares at net asset value. Federal and state credit unions may also purchase
shares at net asset value.
In addition, shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Underwriter, and their
registered personnel and employees, including members of the immediate families
of such registered personnel and employees.
Clients of investment advisors and financial planners may also purchase shares
of the Fund at net asset value if their investment advisor or financial planner
has made arrangements to permit them to do so with the Fund and the Underwriter.
The investment advisor or financial planner must notify the Fund that an
investment qualifies as a purchase at net asset value.
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.
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<PAGE>
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
Direct Deposit Plans
--------------------
You may purchase shares of the Fund may be purchased through direct deposit
plans offered by certain employers and government agencies. These plans enable
you to have all or a portion of your 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 or both. The minimum initial and subsequent
investments must be $50 under the
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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. If the
name(s) or address of your account has been changed within 30 days of your
redemption request, you will be required to request the redemption in writing
with your signature guaranteed regardless of the value of shares being redeemed.
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 $13
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
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depository institution via an Automated Clearing House (ACH) transaction. There
is currently no charge for ACH transactions. Contact the Fund for more
information about ACH transactions.
Shares are redeemed at the net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable charges imposed by unaffiliated brokers,
dealers or your bank, as described herein. Payment is normally made within three
business days after tender in such form, provided that payment in redemption of
shares purchased by check will be effected only after the check has been
collected, which may take up to fifteen days from the purchase date. To
eliminate this delay, you may purchase shares of the Fund by certified check or
wire.
At the discretion of the Fund or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Fund reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested including any
initial sales charge paid, unaffected by market fluctuations), or $250 in the
case of tax-deferred retirement plans, or such other minimum amount as the Fund
may determine from time to time. After notification to 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:
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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.
If you have received any dividend or capital gains distribution from the Fund in
cash, you 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. You or your dealer must notify the Fund that a distribution is being
reinvested pursuant to this provision.
TAXES
-----
The Fund has qualified in all prior years and intends to qualify and to be
treated as a "regulated investment company" under Subchapter M of the Code by
annually distributing substantially all of its net investment company taxable
income, net tax-exempt income and net capital gains in dividends to its
shareholders and by satisfying certain other requirements related to the sources
of its income and the diversification of its assets. By so qualifying, the Fund
will not be subject to federal income tax or excise tax on that part of its
investment company taxable income and net realized short-term and long-term
capital gains which it distributes to its shareholders in accordance with the
Code's timing requirements.
Dividends and distributions paid to shareholders (whether received in cash or
reinvested in additional shares) are generally subject to federal income tax and
may be subject to state and local income tax. Dividends from net investment
income and distributions from any excess of net realized short-term
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capital gains over net realized capital losses are taxable to shareholders
(other than tax-exempt entities that have not borrowed to purchase or carry
their shares of the Funds) as ordinary income.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) by the Fund to its shareholders are taxable
to you as capital gains, without regard to the length of time you have held your
Fund shares. Capital gains distributions may be taxable at different rates
depending on the length of time a Fund holds its assets.
The Trust will mail a statement to you annually indicating the amount and
federal income tax status of all distributions made during the year. The Funds'
distributions may be subject to federal income tax whether received in cash or
reinvested in additional shares. In addition to federal taxes, you may be
subject to state and local taxes on distributions.
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. Because these fees are paid out of the
Fund's assets on an on-going basis, over time these fees will increase the cost
of your investment and may cost you more than paying other types of sales
charges. 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.
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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.
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FINANCIAL HIGHLIGHTS
--------------------
The financial highlights table is intended to help you understand the
Fund's financial performance for the past year. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). The
information for the year ended March 31, 2000 has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Fund's audited
financial statements, are included in the current annual report, which is
available upon request. The information for periods ended prior to March 31,
2000 was audited by other independent auditors.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Year Year Period
Ended Ended Ended
March 31, March 31, March 31,
2000 1999 1998 (a)
-------------------------------------------------------------------------------------------------------------
<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
------------ ------------ ------------
Less distributions:
Distributions from net realized gains (0.29) (0.07) --
------------ ------------ ------------
Net asset value at end of period $ 19.27 $ 14.15 $ 12.58
============ ============ ============
Total return (b) 38.55% 13.07% 25.80%
============ ============ ============
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%
-------------------------------------------------------------------------------------------------------------
</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.
(d) Annualized.
- 15 -
<PAGE>
THE NEW YORK STATE OPPORTUNITY FUNDS
4605 E. Genesee Street
DeWitt, New York 13214
BOARD OF TRUSTEES
Gregg A. Kidd
Joseph Masella
Joseph E. Stanton
Mark E. Wadach
INVESTMENT ADVISOR
Pinnacle Advisors LLC
4605 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
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York 10036
CUSTODIAN
THE BANK OF NEW YORK
90 Washington Street
New York, New York 10286
ADMINISTRATOR/TRANSFER AGENT
ULTIMUS FUND SOLUTIONS, LLC
135 Merchant Street, Suite 230
Cincinnati, Ohio 45246
Shareholder Services
--------------------
Nationwide: (Toll-Free) 888-899-8344
Additional information about the Fund is included in the Statement of Additional
Information ("SAI") and which is incorporated by reference in its entirety.
Additional information about the Fund's investments will be made available in
the Fund's annual and semiannual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and strategies that
significantly affected the Fund's performance during their last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Fund, or to make inquiries about the Fund, please call
1-888-899-8344 (Nationwide).
- 16 -
<PAGE>
Information about the Fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's public reference room in Washington, D.C.
Information about the operation of the public reference room can be obtained by
calling the Commission at 1-202-942-0330. Reports and other information about
the Fund is available on the Commission's Internet site at http://www.sec.gov.
Copies of information on the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address:
[email protected] or by writing to: Securities and Exchange Commission, Public
Reference Section, Washington, D.C. 20549-6009.
- 17 -
<PAGE>
[Artist's rendition of New York state.]
New York State
Opportunity Funds
Invest close to home...
PROSPECTUS
August 1, 2000
Although these securities have been registered with the Securities and Exchange
Commission, the Commission has not judged them for investment merit and does not
guarantee the accuracy of adequacy of the information in the Prospectus. Anyone
who informs you otherwise is committing a criminal act.
<PAGE>
THE NEW YORK STATE OPPORTUNITY FUNDS
------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
August 1, 2000
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, 2000. 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.
- 1 -
<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 .................. 8
INVESTMENT LIMITATIONS ................................................... 10
TRUSTEES AND OFFICERS .................................................... 11
THE INVESTMENT ADVISOR ................................................... 13
THE UNDERWRITER .......................................................... 14
DISTRIBUTION PLAN ........................................................ 14
SECURITIES TRANSACTIONS .................................................. 15
PORTFOLIO TURNOVER ....................................................... 17
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE ..................... 17
OTHER PURCHASE INFORMATION ............................................... 18
TAXES .................................................................... 19
REDEMPTION IN KIND ....................................................... 20
HISTORICAL PERFORMANCE INFORMATION ....................................... 20
PRINCIPAL SECURITY HOLDERS ............................................... 22
CUSTODIAN ................................................................ 22
INDEPENDENT AUDITORS ..................................................... 22
TRANSFER AGENT ........................................................... 23
ANNUAL REPORT ............................................................ 23
- 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
---------------------------------------------
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.
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus 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.
OPTIONS. When the Advisor believes that individual portfolio securities are
approaching the Advisor's growth and price expectations, covered call options
(calls) may be written (sold) against such securities in a disciplined approach
to selling portfolio securities.
If the Fund writes a call, it receives a premium and agrees to sell the
underlying security to a purchaser of a corresponding call at a specified price
("strike price") by a future date ("exercise date"). To terminate its obligation
on a call the Fund has written, it may purchase a corresponding call in a
"closing purchase transaction". A profit or loss will be realized, depending
upon whether the price of the closing purchase transaction is more or less than
the premium (net of transaction costs) previously received on the call written.
The Fund may also realize a profit if the call it has written lapses
unexercised, in which case the Fund keeps the premium and retains the underlying
security as well. If a call written by the Fund is exercised, the Fund forgoes
any possible profit from an increase in the market price of the underlying
security over the exercise price plus the premium received. The Fund writes
options only for hedging purposes and not for speculation where the aggregate
value of the underlying obligations will not exceed 25% of the Fund's net
assets. If the Advisor is incorrect in its expectations and the market price of
a stock subject to a call option rises above the exercise price of the option,
the Fund will lose the opportunity for further appreciation of that security.
Profits on closing purchase transactions and premiums on lapsed calls
written are considered capital gains for financial reporting purposes and are
short term gains for federal income tax purposes. When short term gains are
distributed to shareholders, they are taxed as ordinary income. If the Fund
desires to enter into a closing purchase transaction, but there is no market
when it desires to do so, it would have to hold the securities underlying the
call until the call lapses or until the call is exercised.
The Fund will only write options which are issued by the Options Clearing
Corporation and listed on a national securities exchange. Call writing affects
the Fund's portfolio turnover rate and the 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.
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
- 4 -
<PAGE>
or are held in one or more accounts or through one or more different exchanges
or through one or more brokers. Therefore the number of calls the Fund may write
(or purchase in closing transactions) may be affected by options written or held
by other entities, including other clients of the Advisor. An exchange may order
the liquidation of positions found to be in violation of these limits and may
impose certain other sanctions.
WARRANTS AND RIGHTS. Warrants are essentially options to purchase equity
securities at specific prices and are valid for a specific period of time.
Prices of warrants do not necessarily move in concert with the prices of the
underlying securities. Rights are similar to warrants but generally have a short
duration and are distributed directly by the issuer to its shareholders. Rights
and warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
FOREIGN SECURITIES. The Fund may invest in foreign securities if the
Advisor believes such investment would be consistent with the Fund's investment
objective. The same factors would be considered in selecting foreign securities
as with domestic securities, as discussed in the Prospectus. Foreign securities
investment presents special considerations not typically associated with
investments in domestic securities. Foreign taxes may reduce income. Currency
exchange rates and regulations may cause fluctuation in the value of foreign
securities. Foreign securities are subject to different regulatory environments
than in the United States and, compared to the United States, there may be a
lack of uniform accounting, auditing and financial reporting standards, less
volume and liquidity and more volatility, less public information and less
regulation of foreign issuers. Countries have been known to expropriate or
nationalize assets, and foreign investments may be subject to political,
financial or social instability or adverse diplomatic developments. There may be
difficulties in obtaining service of process on foreign issuers and difficulties
in enforcing judgments with respect to claims under the U.S. securities laws
against such issuers. Favorable or unfavorable differences between U.S. and
foreign economies could affect 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.
The Fund may invest in foreign issuers directly or through 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.
- 5 -
<PAGE>
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities or
other high-grade debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve System or a registered Government Securities dealer)
and must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. Such
securities, including any securities so substituted, are referred to as the
"Repurchase Securities." The repurchase price exceeds the purchase price by an
amount which reflects an agreed upon market interest rate effective for the
period of time during which the repurchase agreement is in effect.
The majority of these transactions run day-to-day, and the delivery
pursuant to the resale typically will occur within one to five days of the
purchase. The Fund's risk is limited to the ability of the vendor to pay the
agreed upon sum upon the delivery date; in the event of bankruptcy or other
default by the vendor, there may be possible delays and expenses in liquidating
the instrument purchased, decline in its value and loss of interest. These risks
are minimized when the Fund holds a perfected security interest in the
Repurchase Securities and can therefore sell the instrument promptly. Under
guidelines issued by the Trustees, the Advisor will carefully consider the
creditworthiness of a vendor during the term of the repurchase agreement.
Repurchase agreements are considered loans collateralized by the Repurchase
Securities, such agreements being defined as "loans" under the Investment
Company Act of 1940 (the "1940 Act"). The return on such "collateral" may be
more or less than that from the repurchase agreement. The market value of the
resold securities will be monitored so that the value of the "collateral" is at
all times as least equal to the value of the loan, including the accrued
interest earned thereon. All Repurchase Securities will be held by the Fund's
custodian either directly or through a securities depository.
DESCRIPTION OF MONEY MARKET INSTRUMENTS. Money market instruments may
include U.S. Government Securities or corporate debt obligations (including
those subject to repurchase agreements) as described herein, provided that they
mature in thirteen months or less from the date of acquisition and are otherwise
eligible for purchase by the Fund. Money market instruments also may include
Bankers' Acceptances and Certificates of Deposit of domestic branches of U.S.
banks, Commercial Paper and Variable Amount Demand Master Notes ("Master
Notes"). BANKERS' ACCEPTANCES are time drafts drawn on and "accepted" by a bank,
which are the customary means of effecting 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
- 6 -
<PAGE>
Commercial Paper only if it is rated in the highest rating category by any
nationally recognized statistical rating organization ("NRSRO") or, if not
rated, if the issuer has an outstanding unsecured debt issue rated in the three
highest categories by any NRSRO or, if not so rated, is of equivalent quality in
the Advisor's assessment. Commercial Paper may include Master Notes of the same
quality. MASTER NOTES are unsecured obligations which are redeemable upon demand
of the holder and which permit the investment of fluctuating amounts at varying
rates of interest. Master Notes are acquired by the Fund only through the Master
Note program of the Fund's custodian, acting as administrator thereof. The
Advisor will monitor, on a continuous basis, the earnings power, cash flow and
other liquidity ratios of the issuer of a Master Note held by the Fund.
FORWARD COMMITMENT AND WHEN-ISSUED SECURITIES. The Fund may purchase
securities on a when-issued basis or for settlement at a future date if the Fund
holds sufficient assets to meet the purchase price. In such purchase
transactions the Fund will not accrue interest on the purchased security until
the actual settlement. Similarly, if a security is sold for a forward date, the
Fund will accrue the interest until the settlement of the sale. When-issued
security purchases and forward commitments have a higher degree of risk of price
movement before settlement due to the extended time period between the execution
and settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Advisor felt such action was appropriate. In such a case
the Fund could incur a short-term gain or loss.
UNSEASONED ISSUERS. The Fund may invest a portion of its assets in small,
unseasoned companies. While smaller companies generally have potential for rapid
growth, they often involve higher risks because they lack the management
experience, 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.
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
- 7 -
<PAGE>
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.
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.
- 8 -
<PAGE>
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be 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.
- 9 -
<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;
(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;
- 10 -
<PAGE>
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
(4) Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.);
(5) Make loans of money or securities, except that the Fund may invest in
repurchase agreements;
(6) Write, purchase or sell commodities, commodities contracts, futures
contracts or related options (except that the Fund may write covered call
options as described in the Prospectus);
(7) Invest more than 25% of its total assets in the securities of issuers in
any particular industry, except that this restriction does not apply to
investments in securities of the United States Government, its agencies or
instrumentalities;
(8) Invest for the purpose of exercising control or management of another
issuer; or
(9) Invest in interests in real estate, real estate mortgage loans, oil, gas or
other mineral exploration or development programs, except that the Fund may
invest in the securities of companies (other than those which are not
readily marketable) which own or deal in such things.
Percentage restrictions stated as an investment limitation apply at the
time of investment; if a later increase or decrease in percentage beyond the
specified limits results from a change in securities values or total assets, it
will not be considered a violation. However, in the case of the borrowing
limitation (limitation number 1, above), the Fund will, to the extent necessary,
reduce its existing borrowings to comply with the limitation.
While the Fund has reserved the right to make short sales "against the box"
(limitation number 4, above), the Advisor has no present intention of engaging
in such transactions at this time or during the coming year.
TRUSTEES AND OFFICERS
---------------------
The following is a list of the Trustees and executive officers of the Trust
and their compensation from the Trust for the fiscal year ended March 31, 2000.
Each Trustee who is an "interested person" of the Trust, as defined by the 1940
Act, is indicated by an asterisk.
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<PAGE>
Compensation
Name Age Position Held From the Trust
---- --- ------------- --------------
*Gregg A. Kidd 37 President $0
and Trustee
+Joseph Masella 50 Trustee 3,000
+Joseph E. Stanton 73 Trustee 3,000
+Mark E. Wadach 49 Trustee 3,000
Robert G. Dorsey 43 Vice President 0
John F. Splain 43 Secretary 0
Mark J. Seger 38 Treasurer 0
* Mr. Kidd, as an affiliated person of the Advisor and the Underwriter, is an
"interested person" within the meaning of Section 2(a)(19) of the 1940 Act.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
GREGG A. KIDD, 4605 E. Genesee Street, DeWitt, New York, is President of
Pinnacle Advisors LLC, the Trust's investment advisor. He is also the President
of Pinnacle Investments, Inc., the Trust's principal underwriter. He previously
was a Vice President of Smith Barney, Inc. (a registered broker-dealer and
investment advisor).
JOSEPH MASELLA, One Unity Plaza at Franklin Square, Syracuse, New York, is
an officer and Director of Unity Life and a Director of Germantown Life (both of
which are insurance companies).
JOSEPH E. STANTON, 206 Lafayette Lane, Fayetteville, New York, is the
former owner of Stanton's (a grocery store).
MARK E. WADACH, 1010 James Street, Syracuse, New York, is a Consultant for
Syracuse Securities (a real estate financing firm).
ROBERT G. DORSEY, 135 Merchant Street, Cincinnati, Ohio, is a Managing
Director of Ultimus Fund Solutions, LLC. Prior to March 1999, he was President
of Countrywide Fund Services, Inc. (a mutual fund services company).
JOHN F. SPLAIN, 135 Merchant Street, Cincinnati, Ohio, is a Managing
Director of Ultimus Fund Solutions, LLC. Prior to March 1999, he was First Vice
President and Secretary of Countrywide Fund Services, Inc. and affiliated
companies.
- 12 -
<PAGE>
MARK J. SEGER, 135 Merchant Street, Cincinnati, Ohio, is a Managing
Director of Ultimus Fund Solutions, LLC. Prior to March 1999, he was First Vice
President of Countrywide Fund Services, Inc.
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 year ended March 31, 2000 the Fund accrued $76,290 in advisory fees.
The Advisor voluntarily waived $57,638 of its fee in order to maintain the
Fund's operating expenses at 1.98%. For the fiscal years ended March 31, 1999
and 1998 the Fund accrued advisory fees of $34,538 and $7,289, respectively.
However, in order to reduce the operating expenses of the Fund, the Advisor
voluntarily waived its entire advisory fee for the years ended 1999 and 1998 and
reimbursed the Fund $52,586 for the year ended 1999 and $79,997 for year ended
1998 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.
By its terms, the Trust's advisory agreement will remain in force until
April 4, 2001 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
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<PAGE>
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 years ended March 31, 2000, 1999 and 1998 the aggregate
commissions collected on sales of the Fund's shares were $54,526, $94,836 and
$57,628, respectively, of which the Underwriter paid $6,877, $23,776 and
$10,288, respectively to unaffiliated broker-dealers in the selling network and
earned $47,649, $71,060 and $47,340, respectively 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, 2001 and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of the majority of the Fund's
outstanding voting securities; provided that in either event continuance is also
approved by a majority of the Trustees who are not interested persons of the
Trust, by a vote cast in person at a meeting called for the purpose of voting
such approval. The Trust's underwriting agreement may be terminated at any time,
on sixty days' written notice, without the payment of any penalty, by the Board
of Trustees, by a vote of the majority of the Fund's outstanding voting
securities, or by the Advisor. The underwriting agreement automatically
terminates in the event of its assignment, as defined by the 1940 Act and the
rules thereunder.
DISTRIBUTION PLAN
-----------------
As stated in the Prospectus, the Fund has adopted a plan of distribution
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act which permits the Fund to
pay for expenses incurred in the distribution and promotion of its shares,
including but not limited to, the printing of prospectuses, statements of
additional information and reports used for sales purposes, advertisements,
expenses of preparation and printing of sales literature, promotion, marketing
and sales expenses, and other distribution-related expenses, including any
distribution fees paid
- 14 -
<PAGE>
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 year ended March 31,
2000, the Fund incurred $16,300 in distribution expenses. The Fund paid $15,860
in distribution expenses as payments to broker-dealers and $440 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 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 have 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
- 15 -
<PAGE>
commission rates that are reasonable in relation to the benefits received. For
the fiscal years ended March 31, 2000, 1999 and 1998 the Fund paid brokerage
commissions of $85,817, $35,717 and $4,299, respectively. All such brokerage
commissions were paid to the Underwriter, which effected 100% of the Fund's
securities transactions during the fiscal periods ended March 31, 2000, 1999 and
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.
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, the Advisor and the Underwriter 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 Underwriter and, as described below, imposes
additional, more onerous, restrictions on investment personnel of the
- 16 -
<PAGE>
Advisor. The Code requires that all employees of the Advisor and Underwriter to
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 pre-clearance requirement on acquiring any
securities in an initial public offering and a prohibition from profiting on
short-term trading in securities. Furthermore, the Code provides for trading
"blackout periods" which prohibit trading by investment personnel of the Advisor
within periods of trading by the Fund in the same (or equivalent) security.
PORTFOLIO TURNOVER
------------------
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year, exclusive of
short-term instruments, by the monthly average of the value of the portfolio
securities owned by the Fund during the fiscal year. High portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs, which will be borne directly by the Fund. The Advisor anticipates that
the Fund's portfolio turnover rate normally will not exceed 100%. A 100%
turnover rate would occur if all of the Fund's portfolio securities were
replaced once within a one year period. For the fiscal period ended March 31,
2000, 1999 and 1998, the Fund's portfolio turnover rate was 154%, 96% and 25%,
respectively.
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.
- 17 -
<PAGE>
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.
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.
RIGHT OF ACCUMULATION. A "purchaser" (as defined above) 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 Integrated
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 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
- 18 -
<PAGE>
would then begin on the date of the first purchase during the ninety-day period.
No retroactive adjustment will be made if purchases exceed the amount indicated
in the Letter of Intent. The purchaser or his dealer must notify the Transfer
Agent that an investment is being made pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose an initial sales charge or
imposes a reduced initial sales charge in connection with purchases of shares of
the Fund made under the reinvestment privilege or the purchases described in the
"Reduced Initial Sales Charge" or "Purchases at Net Asset Value" sections 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.
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
- 19 -
<PAGE>
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
------------------
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)
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 $10,000 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
average annual total returns of the Fund for the periods ended March 31, 2000
are as follows:
1 year 31.97%
Since inception (May 12, 1997) 24.37%
- 20 -
<PAGE>
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 for the year ended March 31, 2000 was 38.55%.
The Fund's performance may be compared in advertisements, sales literature
and other communications to the performance of other mutual funds having similar
objectives or to standardized indices or other measures of investment
performance. In particular, the Fund may compare its performance to the S&P 500
Index, which is generally considered to be representative of the performance of
unmanaged common stocks that are publicly traded in the United States securities
markets. Comparative performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service, such as Lipper Analytical
Services, Inc. or Morningstar, Inc., or by one or more newspapers, newsletters
or financial periodicals. Performance comparisons may be useful to investors who
wish to compare the Fund's past performance to that of other mutual funds and
investment products. Of course, past performance is not a guarantee of future
results.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to
obtain a more complete view of the Fund's performance before investing. Of
course, when comparing the Fund's performance to any index, factors such as
composition of the index and prevailing market conditions should be considered
in assessing the significance of such comparisons. When comparing funds using
reporting services, or total return, investors should take into consideration
any relevant differences in funds such as permitted portfolio compositions and
methods used to value portfolio securities and compute offering price.
Advertisements and other sales literature
- 21 -
<PAGE>
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 14, 2000, the marital trust #3 fixed income Bradley/ Brian/
Craig and Greg Cuvelier, P.O. Box 266, Sodus, New York owned of record 26.92% of
the outstanding shares of the Fund. The above shareholder may be deemed to be a
"control" person due to its ownership of more than 25% of the outstanding shares
of the Fund.
As of July 14, 2000, the Trustees and officers of the Trust as a group
owned of record or beneficially less than 1% 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 PricewaterhouseCoopers, LLP (PWC) has been selected as
independent auditors for the Trust for the fiscal year ending March 31, 2001.
PWC, 1177 Avenue of the Americas, New York, New York 10036, performs an annual
audit of the Trust's financial statements and advises the Trust as to certain
accounting matters.
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<PAGE>
TRANSFER AGENT
--------------
Effective August 21, 2000, the Trust has retained Ultimus Fund Solutions,
Inc. (the "Transfer Agent") 135 Merchant Street, Suite 230, Cincinnati, Ohio
45246, to act as its transfer agent. 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 $1,500 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 base fee of $2,500 per month plus an
asset-based fee computed as a percentage of the Fund's average net assets in
excess of $25 million. 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 $50,000,000,
.125% of such assets from $50,000,000 to $100,000,000, .1% of such assets from
$100 million to $250 million, .075% of such assets from $250 million to $500
million, and .05% of such assets in excess of $500,000,000, provided, however,
that the minimum fee is $2,000 per month.
Prior to August 21, 2000, Integrated Fund Services, Inc. ("Integrated")
provides the transfer agency, accounting and administrative services described
above with respect to the Transfer Agent. Integrated is a wholly-owned
subsidiary of The Western and Southern Life Insurance Company. For the fiscal
years ended March 31, 2000, 1999 and 1998, Integrated received fees of $12,000,
$12,000 and $9,000, respectively, for providing administrative services to the
Fund.
ANNUAL REPORT
-------------
The Fund's Annual Audited Financial Statements as of March 31, 2000, which
have been audited by PricewaterhouseCoopers, LLP, are attached to this Statement
of Additional Information.
- 23 -
<PAGE>
--------------------------------------------------------------------------------
NEW YORK EQUITY FUND
--------------------
ANNUAL REPORT
March 31, 2000
INVESTMENT ADVISOR ADMINISTRATOR
------------------ -------------
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
--------------------------------------------------------------------------------
<PAGE>
[LOGO]
--------------------------------------------------------------------------------
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
<PAGE>
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
-------
New York Equity Fund $18,771
Standard & Poor's 500 Index $18,652
------------------------------
New York Equity Fund**
Average Annual Total Returns
------------------------------
1 Year Since Inception*
31.97% 24.37%
------------------------------
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
-----------
TOTAL ASSETS 10,410,669
-----------
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
-----------
TOTAL LIABILITIES 350,979
-----------
NET ASSETS $10,059,690
===========
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
-----------
NET ASSETS $10,059,690
===========
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 521,986
===========
Net asset value and redemption price per share (Note 1) $ 19.27
===========
Maximum offering price per share ($19.27/95.25%) $ 20.23
===========
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
------------
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
------------
TOTAL EXPENSES 208,693
Fees waived by the Advisor (Note 3) (57,638)
------------
NET EXPENSES 151,055
------------
NET INVESTMENT LOSS (87,788)
------------
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
------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,737,831
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,650,043
============
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Year Year
Ended Ended
March 31, March 31,
2000 1999
------------------------------------------------------------------------------------------------------
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
------------ ------------
Net increase in net assets from operations 2,650,043 599,101
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains from security transactions (142,527) (29,519)
------------ ------------
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)
------------ ------------
Net increase in net assets from capital share transactions 1,255,470 4,145,937
------------ ------------
TOTAL INCREASE IN NET ASSETS 3,762,986 4,715,519
NET ASSETS:
Beginning of year 6,296,704 1,581,185
------------ ------------
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)
------------ ------------
Net increase in shares outstanding 76,976 319,274
Shares outstanding, beginning of year (Note 1) 445,010 125,736
------------ ------------
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>
-------------------------------------------------------------------------------------------------------------
Year Year Period
Ended Ended Ended
March 31, March 31, March 31,
2000 1999 1998 (a)
-------------------------------------------------------------------------------------------------------------
<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
------------ ------------ ------------
Less distributions:
Distributions from net realized gains (0.29) (0.07) --
------------ ------------ ------------
Net asset value at end of period $ 19.27 $ 14.15 $ 12.58
============ ============ ============
Total return (b) 38.55% 13.07% 25.80%
============ ============ ============
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%
-------------------------------------------------------------------------------------------------------------
</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
--------------------------------------------------------------------------------
MARKET
SHARES COMMON STOCKS --- 98.0% VALUE
--------------------------------------------------------------------------------
($)
COMPUTER PERIPHERAL --- 10.2%
5,000 EMC Corporation (a) .............................. 625,000
5,500 Mechanical Technology Inc. (a) ................... 390,500
------------
1,015,500
CONGLOMERATES --- 7.7%
5,000 General Electric Company ......................... 775,938
------------
CONSUMER, NON-CYCLICAL --- 6.4%
5,500 Bristol-Myers Squibb Company ..................... 317,625
9,000 Pfizer, Inc. ..................................... 329,062
------------
646,687
------------
ENERGY --- 0.7%
700 Amerada Hess Corporation ......................... 45,238
500 Texaco, Inc. ..................................... 26,812
------------
72,050
------------
FINANCIAL SERVICES --- 35.9%
2,000 American Express Company ......................... 297,875
10,000 AXA Financial, Inc. .............................. 358,750
10,000 Bank of New York Company, Inc. ................... 415,625
6,000 Bear Stearns Companies, Inc. ..................... 273,750
3,500 Chase Manhattan Corporation ...................... 305,156
5,000 Citigroup, Inc. .................................. 296,563
3,000 J.P. Morgan & Co., Inc. .......................... 395,250
4,000 Lehman Brothers Holdings, Inc. ................... 388,000
100 M&T Bank Corporation ............................. 44,650
3,000 Merrill Lynch & Co., Inc. ........................ 315,000
10,000 Paychex, Inc. .................................... 523,750
------------
3,614,369
------------
RESEARCH & DEVELOPMENT --- 4.6%
8,000 Albany Molecular Research, Inc. (a) .............. 467,000
------------
<PAGE>
NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
--------------------------------------------------------------------------------
MARKET
SHARES COMMON STOCKS --- 98.0% VALUE
--------------------------------------------------------------------------------
($)
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
------------
2,473,875
------------
TELECOMMUNICATIONS --- 4.8%
4,000 JDS Uniphase Corporation (a) ..................... 482,250
------------
UTILITIES --- 3.1%
5,000 Bell Atlantic Corporation ........................ 305,625
100 Consolidated Edison, Inc. ........................ 2,900
------------
308,525
------------
TOTAL INVESTMENTS AT VALUE - 98.0%
(COST $7,424,604) ................................ $ 9,856,194
OTHER ASSETS IN EXCESS OF LIABILITIES - 2.0% ..... 203,496
------------
NET ASSETS - 100.0% .............................. $ 10,059,690
============
(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>
THE NEW YORK STATE OPPORTUNITY FUNDS
------------------------------------
PART C. OTHER INFORMATION
------- -----------------
Item 23. Exhibits
-------- --------
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Incorporated by reference to Agreement and Declaration of Trust
and Bylaws
(d) Advisory Agreement with Pinnacle Advisors LLC*
(e) Underwriting Agreement with Pinnacle Investments, Inc.*
(f) Inapplicable
(g) Custody Agreement with The Bank of New York*
(h) (i) Administration Agreement with Countrywide Fund Services,
Inc.*
(ii) Accounting Services Agreement with Countrywide Fund
Services, Inc.*
(iii)Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement with Countrywide Fund Services, Inc.*
(i) Opinion and Consent of Counsel*
(j) (i) Consent of PricewaterhouseCoopers LLP
(ii) Consent of McGladrey & Pullen LLP
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m) Plan of Distribution Pursuant to Rule 12b-1*
(n) Financial Data Schedule**
(o) Inapplicable
(p) Code of Ethics
--------------------------------------------------------------------------------
* Incorporated by reference to the Trust's registration statement on Form
N-1A.
** Incorported by reference to the Trust's annual NSAR filing.
<PAGE>
Item 24. 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 25. Indemnification
-------- ---------------
Article VI of the Registrant's Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
"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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
the performance of Underwriters's duties or from the 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 26. Business and Other Connections of the Investment Adviser
------- --------------------------------------------------------
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.
(a) 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 27. 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
The address of the above-named persons is 4605 E. Genesee Street,
DeWitt, New York 13214.
<PAGE>
(c) Inapplicable
Item 28. 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 29. Management Services Not Discussed in Parts A or B
------- -------------------------------------------------
Inapplicable
Item 30. Undertakings
-------- ------------
Inapplicable
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it 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, 2000.
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, 2000
----------------------------- and Trustee
Gregg A. Kidd
/s/ Theresa M. Samocki Treasurer July 31, 2000
-----------------------------
Theresa M. Samocki
Trustee By: /s/ Tina D. Hosking
----------------------------- -------------------
Joseph Masella* Tina D. Hosking
Attorney-in-Fact*
Trustee July 31, 2000
-----------------------------
Joseph E. Stanton*
Trustee
-----------------------------
Mark E. Wadach*
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Incorporated by reference to Articles of Incorporation and Bylaws
(d) Advisory Agreement*
(e) Underwriting Agreement*
(f) Inapplicable
(g) Custody Agreement*
(h) (i) Administration Agreement*
(h) (ii) Accounting Services Agreement*
(h) (iii)Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement*
(i) Opinion and Consent of Counsel*
(j) (i) Consent of PricewaterhouseCoopers LLP
(ii) Consent of McGladrey & Pullen LLP
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m) Plan of Distribution Pursuant to Rule 12b-1*
(n) Financial Data Schedule**
(o) Inapplicable
(p) Code of Ethics
--------------------------------------------------------------------------------
* Incorporated by reference to the Trust's registration statement on Form
N-1A.
** Incorporated by reference to the Trust's NSAR filing.
