File No. 33-53698
and 811-7322
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 6
(Check Appropriate Box or Boxes)
____________________
CANANDAIGUA NATIONAL COLLECTIVE INVESTMENT FUND
FOR QUALIFIED TRUSTS
(Exact Name of Registrant as Specified in Charter)
72 SOUTH MAIN STREET, CANANDAIGUA, NEW YORK 14424
(Address of Principal Executive Office and Zip Code)
REGISTRANT'S TELEPHONE NUMBER: 1-800-724-2621 (EXT. 216)
____________________
Robert G. Sheridan, Cashier
The Canandaigua National Bank and Trust Company
72 South Main Street
CANANDAIGUA, NEW YORK 14424
(Name and Address of Agent for Service)
Copy to:
Thomas P. Young, Esq.
Underberg & Kessler LLP
1800 Chase Square
Rochester, New York 14604
(Continued on next page)
Approximate Date of Proposed Public Offering:
Registration Statement Became Effective
December 11, 1992
It is proposed that this filing will become effective:
(Check appropriate box)
[ X ] Immediately upon filing pursuant to Paragraph (b)
[ ] On [date] pursuant to Paragraph (b)
[ ] 60 Days After Filing pursuant to Paragraph (a)(1)
[ ] On [date] pursuant to Paragraph (a)(1)
[ ] 75 days after filing pursuant to Paragraph (a)(2)
[ ] On [date] pursuant to Paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM AMOUNT
SECURITIES AMOUNT OFFERING AGGREGATE OF
BEING BEING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT PRICE FEE
<S> <C> <C> <C> <C>
Units Indefinite* N/A N/A $ **
____________ ____________ ____________ ____________ ____________
</TABLE>
_______________________________
* An indefinite number of units of beneficial interest in the Registrant
is being registered by this Registration Statement pursuant to Rule
24f-2 under the Investment Company Act of 1940.
** The Registrant's Rule 24f-2 Notice for its fiscal year ended December
31, 1996 will be filed no later than June 30, 1997, together with the
payment of any applicable registration fee at that time.
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<PAGE>
CROSS REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
N-1A ITEM NO. DESCRIPTION LOCATION (CAPTION)
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary
Item 3. Condensed Financial Information Fee Table; Supplementary Financial
Information
Item 4. General Description of Registrant Investment Objectives and Policies; Investment
Restrictions
Item 5. Management of the Fund Administration of the Collective Trust
Item 6. Capital Stock and Other Cover Page; Investment in the Collective
Securities Trust; General Information
Item 7. Purchase of Securities Being Cover Page; Investment in the Collective
Offered Trust; Valuation of Units
Item 8. Redemption or Repurchase Investment in the Collective Trust;
Valuation of Units
Item 9. Pending Legal Proceedings Not Applicable
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<PAGE>
CROSS REFERENCE SHEET
PART B
N-1A ITEM NO. DESCRIPTION LOCATION (CAPTION)
Item 10 Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Investment Objectives and Policies;
Policies Investment Restrictions
Item 14. Management of the Fund Administration of the Collective Trust;
Supervisory Committee and Officers;
Other Officers
Item 15. Control Persons and Principal General Information
Holders of Securities
Item 16. Investment Advisory and Other Investment in the Collective Trust;
Services Administration of the Collective Trust;
The Trustee; General Information
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment in the collective Trust;
Securities General Information
Item 19. Purchase, Redemption and Pricing Investment in the Collective Trust;
of Securities Being Offered Valuation of Units
Item 20. Tax Status Tax Information
Item 21. Underwriters Not Applicable
Item 22. Calculation of Performance Data Supplementary Financial Information;
Performance Data
Item 23. Financial Statements Financial Statements
</TABLE>
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<PAGE>
PROSPECTUS
CANANDAIGUA NATIONAL COLLECTIVE INVESTMENT FUND
FOR QUALIFIED TRUSTS
72 South Main Street
Canandaigua, New York 14424
Telephone No.: 1-800-724-2621 (Ext. 216)
The Canandaigua National Collective Investment Fund for Qualified
Trusts (the "Collective Trust"), also known as the Canandaigua National
Bank Retirement Portfolios, is registered with the Securities and Exchange
Commission (the "SEC") as an open-end diversified management investment
company. The Canandaigua National Bank and Trust Company is the trustee
(in such capacity, the "Trustee", otherwise "Canandaigua National") of the
Collective Trust. For purposes of the Securities Act of 1933 (the
"Securities Act"), Canandaigua National may be considered by the SEC to be
the principal underwriter for the Collective Trust.
Generally, for Federal income tax purposes, money invested in the
Collective Trust and income earned by the Collective Trust will not be
taxable to an investor until such investor receives a distribution from the
Collective Trust. Under the Tax Reform Act of 1986, contributions for
calendar year 1987 and subsequent years by certain investors in individual
retirement accounts are no longer deductible. However, the income earned
on such contributions will not be taxable to the investor until the
investor receives a distribution from the Participating Trust. The
Collective Trust consists of two Retirement Portfolios, each with a
different investment objective, for investment of retirement funds held in
certain Qualified Trusts. "Qualified Trusts" include individual retirement
trust accounts established under trust agreements with Canandaigua National
as trustee ("Canandaigua National IRAs"), and single or commingled pension
or profit-sharing trusts, including 401(k) plans, 403(b) plans, and
corporate pension or profit-sharing trusts and pension or profit-sharing
trusts benefiting one or more self-employed individuals (generally referred
to as HR 10 or Keogh plans), established under trust agreements with
Canandaigua National as trustee ("Canandaigua National Pension Trusts").
Qualified Trusts may select one or both Retirement Portfolios and may
transfer retirement funds from one Retirement Portfolio to the other.
The BOND PORTFOLIO seeks to earn a high level of current income with
consideration also given to safety of principal.
The EQUITY PORTFOLIO seeks long term growth of asset values through
capital appreciation and dividend income.
RETIREMENT FUNDS INVESTED IN THE RETIREMENT PORTFOLIOS ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CANANDAIGUA
NATIONAL BANK AND TRUST COMPANY, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Units of beneficial interest in the Collective Trust, which are sold
without a sales charge, are available only to Qualified Trusts. There
currently is no fee for establishing or maintaining a Qualified Trust.
This Prospectus sets forth concisely information about the Collective
Trust that an investor ought to know before investing. Please read and
retain this Prospectus for future reference. Before investing in the
Collective Trust, each investor should assess the suitability of the
Collective Trust and the individual Retirement Portfolios for such
investor. The Collective Trust has filed with the SEC a Statement of
Additional Information, dated April 29, 1997 ("Statement of Additional
Information"), which sets forth additional and more detailed information
with respect to the Collective Trust. The information in the Statement of
Additional Information is incorporated by reference in this Prospectus. A
copy of the Statement of Additional Information may be obtained without
charge by calling the Canandaigua National Investment Department at 1-800-
724-2621 (Ext. 216). Also, the SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information
as well as other information about the Collective Trust filed
electronically with the SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 29, 1997
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<PAGE>
TABLE OF CONTENTS
PAGE NO.
FEE TABLE 5
PROSPECTUS SUMMARY 6
SUPPLEMENTARY FINANCIAL INFORMATION 8
THE COLLECTIVE TRUST 9
INVESTMENT OBJECTIVES AND POLICIES 10
RETIREMENT PORTFOLIOS 10
BOND PORTFOLIO 10
EQUITY PORTFOLIO 12
OTHER INVESTMENT POLICIES 13
INVESTMENT IN THE COLLECTIVE TRUST 14
ELIGIBILITY FOR ADMISSION (QUALIFIED TRUSTS) 14
CANANDAIGUA NATIONAL IRAS 14
CANANDAIGUA NATIONAL PENSION TRUSTS 15
PURCHASES (ADMISSIONS) 15
WITHDRAWALS (REDEMPTIONS) 16
CANANDAIGUA NATIONAL IRAS 16
CANANDAIGUA NATIONAL PENSION TRUSTS 16
EXCHANGE PRIVILEGE 17
ADMINISTRATION OF THE COLLECTIVE TRUST 18
SUPERVISORY COMMITTEE 18
THE TRUSTEE 18
INVESTMENT MANAGEMENT 18
COMPENSATION OF THE TRUSTEE; EXPENSES 19
GLASS-STEAGALL ACT CONSIDERATIONS 20
TAX INFORMATION 22
PERFORMANCE DATA 22
GENERAL INFORMATION 23
DESCRIPTION OF VOTING RIGHTS 23
PARTICIPANT LIABILITY 24
CUSTODIAN AND UNITHOLDER ACCOUNT SERVICER 24
APPENDIX 25
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<PAGE>
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION,
AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR AN OFFER TO OR A SOLICITATION OF ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL.
SHARES OF THE CANANDAIGUA NATIONAL COLLECTIVE INVESTMENT FUND FOR QUALIFIED
TRUSTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
THE CANANDAIGUA NATIONAL BANK AND TRUST COMPANY, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
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<PAGE>
FEE TABLE
UNITHOLDER TRANSACTION EXPENSES:
There are no sales charges, redemption or exchange fees, or unitholder
transaction expenses for the Collective Trust.
ANNUAL FUND OPERATING EXPENSES:
The following table shows the recurring and nonrecurring expenses
applicable to units during the Collective Trust's most recent year of
operation:
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS) FOR THE YEAR ENDED DECEMBER 31,
1996:
<S> <C> <C>
BOND EQUITY
Management Fees 0.50% 1.00%
Rule 12b-1 Fees 0.00% 0.00%
Other Expenses
Custodial Fees 0.50% 0.03%
Shareholder Servicing Costs 0.00% 0.00%
Other 0.09% 0.09%
Total Other Expenses 0.59% 0.12%
Total Fund Operating Expenses 1.09%* 1.12%*
</TABLE>
____________________
* The maximum annual operating expenses which may be charged to units in
a year is 1.5% of average net assets.
<TABLE>
Example:
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
You would pay the following expenses
on a $1,000 investment, assuming 5%
annual return and a maximum of 1.5%
annual expense. The expenses would
be the same for each time period
whether or not redemption occurred
at the end of the period: $15.75 $48.89 $84.33 $184.13
Investment at End of Period
After Expenses: $1,034.25 $1,106.30 $1,183.39 $1,400.41
</TABLE>
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in the
Collective Trust will bear directly or indirectly. The example should not
be considered a representation of past or future expenses, and actual
expenses may be greater or lesser than those shown.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information which appears elsewhere in this Prospectus and in the
Statement of Additional Information.
THE COLLECTIVE TRUST
The Canandaigua National Collective Investment Fund for Qualified
Trusts (the "Collective Trust") is an open-end diversified management
investment company offering two Retirement Portfolios: the Bond Portfolio
and the Equity Portfolio. The Canandaigua National Bank and Trust Company
("Canandaigua National") is the Trustee of the Collective Trust under a
Declaration of Trust dated September 9, 1992, acts as investment manager
and administrator of the Collective Trust and provides Unitholder account
services. Canandaigua National may be considered by the SEC to be the
principal underwriter of the Collective Trust.
As compensation for these services, the Trustee is paid with respect
to each Retirement Portfolio a monthly management fee at the annual rate of
1.00% of the average daily net assets of such Retirement Portfolio.
Currently, the Supervisory Committee has approved a reduction of the fee
for the Bond Portfolio to 0.50%. The Trustee's fee includes not only
investment advisory services but fiduciary and administrative services.
The total expenses for all such services is, therefore, somewhat lower than
the total of such expenses for most mutual funds. For additional
information relating to Canandaigua National's fee, see "ADMINISTRATION OF
THE COLLECTIVE TRUST -- COMPENSATION OF THE TRUSTEE; EXPENSES."
QUALIFIED TRUSTS
The Collective Trust is designed for the investment of retirement
funds held in certain Qualified Trusts.
"Qualified Trusts" include individual retirement trust accounts
established under trust agreement with Canandaigua National as trustee, and
single or commingled pension or profit-sharing trusts, 401(k) plans, 403(b)
plans, and corporate pension or profit-sharing trusts and pension or
profit-sharing trusts benefiting one or more self-employed individuals
(generally referred to as HR 10 or Keogh Plans), established under trust
agreements with Canandaigua National as trustee. See "INVESTMENT IN THE
COLLECTIVE TRUST -- ELIGIBILITY FOR ADMISSION (QUALIFIED TRUSTS)."
INVESTMENT OBJECTIVES AND POLICIES
The Collective Trust offers two Retirement Portfolios each with a
different investment objective. A Qualified Trust may invest in one or
both Retirement Portfolios and may transfer retirement funds from one
Retirement Portfolio to the other. There can be no assurance that the
investment objective of either Retirement Portfolio can be obtained.
BOND PORTFOLIO. The Bond Portfolio seeks to earn a high level of
current income with consideration also given to safety of principal.
Investment emphasis is on fixed-income securities, primarily debt
securities, such as bonds, notes and debentures, issued by United States
corporations, bonds and notes issued or guaranteed by the United States
Government or its agencies or instrumentalities and preferred stock of
United States corporations.
EQUITY PORTFOLIO. The Equity Portfolio seeks long-term growth of
asset value through capital appreciation and dividend income, by investing
in a diversified group of companies. Primary investment emphasis will be
on common stocks.
INVESTMENT IN THE COLLECTIVE TRUST
The minimum initial investment for the purchase of units of each
Retirement Portfolio is $250.00. Subsequent investments are subject to a
minimum of $50.00. The purchase price per unit of each Retirement
Portfolio will be the net asset value per unit next computed after receipt
of a purchase order. Certain purchase orders for Canandaigua National IRAs
cannot be deemed received until seven days after establishment of the IRA.
See "INVESTMENT IN THE COLLECTIVE TRUST -- PURCHASES (ADMISSIONS)."
REDEMPTIONS AND EXCHANGES
All or a portion of the units held in the Collective Trust can be
redeemed at any time. The redemption price will be the net asset value per
unit next computed after receipt of a redemption order. See "INVESTMENT IN
THE COLLECTIVE TRUST -- WITHDRAWALS (REDEMPTIONS)."
Units in either Retirement Portfolio may be exchanged without cost for
units in the other Retirement Portfolio. Any exchange will be based on the
respective net asset values of the units involved next computed after
receipt of an exchange order. See "INVESTMENT IN THE COLLECTIVE TRUST
EXCHANGE PRIVILEGE."
RISK FACTORS
The value of the Bond Portfolio's fixed income securities can be
expected to vary inversely with changes in the prevailing interest rates.
In addition, lower-rated securities in which the Portfolio may invest may
be lacking certain protective elements and may be subject to greater
investment risk over an extended period. As a result, investment in the
Bond Portfolio should not be considered a complete investment program. See
"BOND PORTFOLIO RISK FACTORS."
The Equity Portfolio will invest in securities whose market values
will fluctuate daily. Further, it is expected that the Portfolio will have
a dollar weighted volatility somewhat higher than the stock market as a
whole. Although the Trustee seeks to reduce the risks associated with
investing in equity securities through diversification, quality criteria
and other investment policies, there can be no assurance that the Equity
Portfolio will achieve its objectives. Investors should not consider the
Equity Portfolio to be a complete investment program. See "EQUITY
PORTFOLIO RISK FACTORS."
Because the dollar weighted average maturity of the Bond Portfolio is
not expected to exceed ten years, and because the volatility of the Equity
Portfolio is expected to be slightly greater than for the stock market as a
whole, the net asset value of the Bond Portfolio is likely to be more
stable than the net asset value of the Equity Portfolio. However, assuming
that markets are efficient in compensating higher risk with higher return,
historical evidence would suggest that a well diversified equity portfolio
with higher than average volatility might produce a higher total return
over an extended period than a bond portfolio having an average maturity of
less than ten years.
RETIREMENT FUNDS INVESTED IN THE RETIREMENT PORTFOLIOS ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CANANDAIGUA
NATIONAL BANK AND TRUST COMPANY, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
SUPPLEMENTARY FINANCIAL INFORMATION
The financial information in the table below has been audited in
conjunction with the annual audit of the financial statements of the
Collective Trust by Morga, Jones & Hufsmith P.C., independent auditors.
Financial statements for the year ended December 31, 1996 and the
independent auditors' report thereon are included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
BOND PORTFOLIO EQUITY PORTFOLIO
For the Year Ended For the Year Ended
December 31, December 31,
<S> <C> <C> <C> <C>
1996 1995 1996 1995
SELECTED DATA FOR A UNIT OF
BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT THE YEAR:
INCREASE (DECEASE) IN NET ASSET
VALUE:
Investment income $ 0.75 $0.91 $0.18 $0.18
Total expenses (0.13) (0.10) (0.17) (0.14)
Investment income - net 0.62 0.81 0.01 0.04
Realized and unrealized gain
(loss) on investments - net (0.33) 1.43 2.95 2.78
Net increase in net
asset value 0.29 2.24 2.96 2.82
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Investment income - net N/A N/A N/A N/A
Realized gain on investments -net N/A N/A N/A N/A
Net decrease in net asset value N/A N/A N/A N/A
resulting from dividends and
distributions
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NET ASSET VALUE:
Total increase in net asset value 0.29 2.24 2.96 2.82
Beginning of year 12.25 10.01 13.71 10.89
End of year 12.54 12.25 16.67 13.71
Number of shares outstanding at
end of year 39,981 33,340 758,660 615,264
SIGNIFICANT RATIOS:
Total expenses to average net
assets 1.09% 0.89% 1.12% 1.11%
Net investment income
to average net assets 5.17% 7.11% 0.03% 0.32%
Portfolio turnover 30.46% 14.13% 337.27% 375.30%
Total Annual Return 2.37% 22.38% 21.59% 25.90%
Average Commission Rate Paid -0- -0- -0- -0-
</TABLE>
The Collective Trust's 1996 Annual Report to Unitholders
contains additional performance information that will be made
available, without charge, upon request to the Canandaigua
National Investment Department, 72 South Main Street,
Canandaigua, New York 14424.
THE COLLECTIVE TRUST
The Canandaigua National Collective Investment Fund for
Qualified Trusts (the "Collective Trust") is a trust
established under the laws of the State of New York by The
Canandaigua National Bank and Trust Company, the Trustee, under
a Declaration of Trust dated September 9, 1992. The Collective
Trust offers two Retirement Portfolios, each with a different
investment objective, for the investment of retirement funds
held in Qualified Trusts. Each Retirement Portfolio is
represented by a separate series of units of beneficial
interest in the Collective Trust.
Only Qualified Trusts can participate in the Collective
Trust. Qualified Trusts which have been admitted to the
Collective Trust are referred to as "Participating Trusts." An
individual for whose benefit a Participating Trust is
maintained, or who may be entitled to receive benefits from a
Participating Trust, is referred to as a "Participant."
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
RETIREMENT PORTFOLIOS
The Collective Trust offers two Retirement Portfolios,
each with a different investment objective. A Qualified Trust
may invest in one or both Retirement Portfolios and may
transfer retirement funds from one Retirement Portfolio to the
other. Since each of the Retirement Portfolios will pursue
different types of investments, the risks of participating in
the Collective Trust will vary depending on the Retirement
Portfolio or Portfolios chosen. Although one of the Retirement
Portfolios may provide greater stability of unit value than the
other, the unit value of each of the Portfolios is subject to
change. Before selecting a Retirement Portfolio or Portfolios,
the risks associated with the types of investments made by the
Retirement Portfolios should be assessed. There can be no
assurance that the investment objective of either Retirement
Portfolio will be attained.
Current income earned by the Retirement Portfolios will be
for reinvestment and further accumulation of assets for
retirement. Accordingly, no current income will be
distributed. Thus, current income will be reinvested by the
Retirement Portfolios and reflected in an increase in net asset
value per unit. This policy is unlike that of most investment
companies which, unlike the Collective Trust, would be taxed on
all income not distributed to shareholders.
BOND PORTFOLIO
The Bond Portfolio seeks to earn a high level of current
income with consideration also given to safety of principal.
Investment emphasis is on fixed-income securities, primarily
debt securities, such as bonds, notes and debentures, issued by
United States corporations, bonds and notes issued or
guaranteed by the United States Government or its agencies or
instrumentalities and preferred stock of United States
corporations. Debt obligations issued or guaranteed by the
United States Government provide greater safety of principal
but also generally provide lower current income than debt
obligations of corporations. They include issues of the U.S.
Treasury such as bills, notes and bonds and issues of agencies
and instrumentalities of the U.S. Government which are
established under the authorities of an act of Congress. They
include securities issued or guaranteed by the Government
National Mortgage Association, the Federal National Mortgage
Association, the Farmers Home Administration, Federal Farm
Credit Banks, Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation and the Student Loan Marketing
Association. Some of these securities such as debenture
obligations of the Farmers Home Administration and securities
of the Government National Mortgage Association are supported
by the full faith and credit of the U.S. Treasury; others such
as obligations of the Federal Home Loan Banks are supported by
the right of the issuer to borrow from the U.S. Treasury;
others such as those of the Federal Farm Credit Banks are
supported by the discretionary authority of the U.S. Government
to purchase the agency's obligations. Still others such as
those of the Student Loan Marketing Association are supported
only by the credit of the instrumentality. No assurance can be
given that the U.S. Government would provide financial support
to any of the foregoing when not obligated to do so by law.
The Bond Portfolio will invest in debt securities of United
States corporations only if at the time of purchase they carry
a rating of at least "Baa" from Moody's Investors Services,
Inc. or "BBB" from Standard & Poor's Corporation. Debt
securities carrying a rating of "Baa" from Moody's Investor
Services Inc. or "BBB" from Standard & Poor's Corporation have
speculative characteristics. See "APPENDIX" for an explanation
of the ratings. A reduction below such rating for any debt
security owned will not require disposition of the security.
The Bond Portfolio's investments in securities other than debt
of United States corporations and debt obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities (e.g., preferred stock and all securities of
foreign issuers) will be in those securities which, in the
judgment of the Trustee, would be of comparable quality to U.S.
securities in which the Bond Portfolio may invest, i.e., those
securities having a rating of "Baa" or better by Moody's or
"BBB" or better by Standard & Poor's. This judgment may be
based upon such considerations as the issuer's financial
strength, including its historic and current financial
condition, its historic and projected earnings and its present
and anticipated cash flow; the issuer's debt maturity schedules
and current and future borrowing requirements; and the issuer's
continuing ability to meet its future obligations. At least
65% of the value of the total assets of the Bond Portfolio
will, under normal market conditions, be invested in bonds or
debentures.
The only non-interest paying securities to be held in the
Bond Portfolio will be (a) zero-coupon obligations of
corporations, and (b) obligations evidencing ownership of
future interest and principal payments on United States
Treasury Bonds. Such zero-coupon obligations pay no current
interest. Zero-coupon obligations are sold at prices
discounted from par value, with that par value to be paid to
the holder at maturity. The return on the zero-coupon
obligation, when held to maturity, equals the difference
between the par value and the original purchase price. Zero-
coupon obligations may be purchased if the Trustee considers
the yield spread between these obligations and coupon issues of
the United States government and United States corporations to
be advantageous, giving consideration to the differing
durations of the zero coupon obligations and the coupon issues.
The Bond Portfolio will only purchase zero-coupon obligations
if at the time of purchase such investments constitute less
than 5% of the value of the Bond Portfolio's total assets.
Various forms of obligations exist to evidence future interest
or principal payments on Treasury securities. Typically such
obligations take the form of custodial receipts issued pursuant
to a custody agreement which evidence ownership of future
interest and principal payments on treasury securities
deposited with the custodian. The interest and principal
payments on the underlying treasury securities are direct
obligations of the United States.
The Bond Portfolio will not invest in securities of
foreign issuers.
The Bond Portfolio will not invest in puts, calls or other
futures contracts.
A portion of the Bond Portfolio may be held in "cash
equivalents." Except when the Trustee, as investment manager
of the Bond Portfolio, assumes a temporary defensive position,
the Portfolio's investment in cash equivalents will not exceed
35% of the Portfolio's total assets. Cash equivalents are
short-term, interest-bearing instruments in which funds are
invested temporarily pending longer-term investment or in which
funds are invested when market conditions dictate a "defensive"
investment strategy. The purpose of cash equivalents is to
provide income at money market rates while minimizing the risk
of decline in value to the maximum extent possible. The
instruments may include commercial paper, certificates of
deposit, repurchase agreements, bankers' acceptances and United
States Treasury Bills.
The Bond Portfolio will invest primarily in fixed-income
securities with a maturity in excess of one year. However,
fixed-income securities can have maturities as long as 30 or
more years. The average maturity of securities in the Bond
Portfolio will be based primarily upon the Trustee's
expectations for the future course of interest rates and then
prevailing price and yield levels in the fixed-income market,
and it is expected that the dollar weighted average maturity of
the Bond Portfolio will not exceed ten years. The limitation
of the average maturity of the Portfolio is expected to provide
a more stable net asset value than would be the case with a
longer term portfolio.
BOND PORTFOLIO RISK FACTORS. Changes in interest rates will
cause the value of securities held in the Bond Portfolio to
vary inversely to changes in prevailing interest rates. If,
however, a security is held to maturity, no gain or loss will
be realized as a result of changes in prevailing rates. The
value of these securities will also be affected by general
market and economic conditions and by the creditworthiness of
the issuer. Fluctuations in value of the Bond Portfolio's
securities will cause net asset value per unit to fluctuate.
By stressing current yield through fixed-income securities, the
Bond Portfolio may provide greater stability of unit value than
the Equity Portfolio. However, retirement funds invested in
the Bond Portfolio should not be expected to appreciate in
value to the same extent as funds in the Equity Portfolio since
there will be minimal participation in the general equity
markets. See "RISK FACTORS" in the PROSPECTUS SUMMARY.
EQUITY PORTFOLIO
The Equity Portfolio seeks long-term growth of asset
values, through capital appreciation and dividend income, by
investing in a diversified group of companies. Primary
investment emphasis will be on common stocks. At least 65% of
the value of the total assets of the Equity Portfolio will,
under normal market conditions, be invested in equity-based
securities, which consist of common stocks as well as debt
securities and preferred stocks which are convertible into
common stocks. Normally, investments of the Equity Portfolio
in cash equivalents will not exceed 35% of its assets.
However, when market conditions dictate a temporary "defensive"
investment strategy, the Trustee may decide to hold a portion
of the Equity Portfolio, without limitation on amount, in cash
equivalents. Such a decision, although not offering the
opportunity for capital appreciation, might be deemed prudent
to protect net asset values. See "INVESTMENT OBJECTIVES AND
POLICIES -- BOND PORTFOLIO," for a definition of "cash
equivalents."
Equity securities of a company will be selected
considering such factors as the sales, growth and profitability
prospects for the economic sector and markets in which the
company operates and for the products or services it provides;
the financial condition of the company and its ability to meet
its liabilities and to provide income in the form of dividends;
the prevailing price of the security; how that price compares
to historical price levels of the securities, to current price
levels in the general market, and to the prices of competing
companies; projected earnings estimates and earnings growth
rate for the company and the relation of those figures to the
current price. It is expected that the volatility of the
Equity Portfolio will be slightly greater than that of the
stock market as a whole. The Equity Portfolio is not expected
to be invested in initial public offerings, illiquid stocks or
stocks having a price of less than $5.00 per share.
In general, the Equity Portfolio will not invest in
securities that have, in the Trustee's judgment, a high level
of debt as a percentage of their total market capitalization.
The Trustee will generally seek to purchase securities that
have lower price to earnings multiples than the market as a
whole. Ratios such as market price to book value, market price
to cash flow, and price to earnings will be considered in
selecting securities for the Equity Portfolio. In addition,
factors such as institutional ownership positions and analyst
coverage (each in relation to market ratios) will be
considered. In order to limit the level of risk, the Portfolio
will be invested in different industries so that the value of
the Portfolio's total assets invested in issuers conducting
their principal business activities in the same industry
ordinarily does not exceed 25% of the Portfolio at the time of
the purchase.
The Equity Portfolio will not invest in securities of
foreign issuers.
The Equity Portfolio will not invest in puts, calls and
other futures contracts.
EQUITY PORTFOLIO RISK FACTORS. The Equity Portfolio will
invest in securities whose market values will fluctuate daily.
Further, it is expected that the Portfolio will have a dollar
weighted volatility somewhat higher than the stock market as a
whole. Although the Trustee will seek to reduce the risks
associated with investing in equity securities through
diversification, quality criteria, and the other investment
policies discussed herein, there can be no assurance that the
Equity Portfolio will achieve its objectives. Because the
Equity Portfolio will participate in the equity markets, it may
provide greater potential for capital appreciation and growth
of current income over the long term than the Bond Portfolio.
However, the Equity Portfolio will generally have a more
volatile unit value and lower current yield than the Bond
Portfolio. See "RISK FACTORS" in the PROSPECTUS SUMMARY.
OTHER INVESTMENT POLICIES
The Retirement Portfolios may each enter into repurchase
agreements. Under these agreements, a Retirement Portfolio
purchases securities from a bank, broker-dealer, savings and
loan association or other recognized financial institution with
a concurrent obligation of the seller to repurchase them within
a specified time at a fixed price (equal to the purchase price
plus interest). Repurchase agreements are considered loans
under the Investment Company Act of 1940, as amended (the
"Investment Company Act"). Repurchase agreements maturing in
more than seven days will not exceed 10% of the value of the
total assets of any Retirement Portfolio. Repurchase
agreements will be entered into only for debt obligations
issued or guaranteed by the United States Government, its
agencies or instrumentalities. Certificated securities must be
placed in the physical possession of the custodian of the
assets of the Collective Trust. Uncertificated securities,
such as Treasury Bills and most agency issues, which are
recorded by book-entry on the records of the Federal Reserve
Banks, must be transferred to the custodian by appropriate
entry in the Federal Reserve Bank's records. If the value of
the securities purchased should decline below the sales price,
additional securities sufficient to make the value of the
securities equal to the sales price must be deposited with the
custodian. If the seller defaults, the Investment Portfolio
might incur a loss if the value of the securities securing the
repurchase agreement declines and might incur disposition costs
in connection with liquidating the securities. In addition, if
bankruptcy proceedings are commenced with respect to the
seller, realization upon the securities by the Retirement
Portfolio may be delayed or denied.
Except after obtaining Unitholder approval, the Retirement
Portfolios will limit their total borrowing to 5% of the
Portfolios' combined net assets. Borrowing by a Retirement
Portfolio will be done only for temporary purposes, and all
borrowings by a Portfolio will be repaid before additional
investments are made by that Portfolio.
In accordance with Section 5.2(c) of the Declaration of
Trust and applicable regulations of the Comptroller of the
Currency, the Retirement Portfolios' assets may be placed in
deposits with Canandaigua National pending investment or
distribution.
The foregoing investment objectives and related policies
are not fundamental and may be changed by the Trustee without
the approval of the holders of a majority of the outstanding
units of the affected Retirement Portfolio or Portfolios.
INVESTMENT IN THE COLLECTIVE TRUST
ELIGIBILITY FOR ADMISSION (QUALIFIED TRUSTS)
Only Qualified Trusts are eligible to invest in the
Collective Trust. Qualified Trusts are:
- Individual retirement trust accounts established under
trust agreements with Canandaigua National as trustee and
maintained in conformity with Section 408(a) of the
Internal Revenue Code ("Canandaigua National IRAs") and
- Single or commingled pension or profit-sharing trusts,
including corporate pension or profit-sharing trusts and
pension or profit-sharing trusts benefiting one or more
self-employed individuals established under trust
agreements with Canandaigua National as trustee and
maintained in conformity with Section 401(a) of the
Internal Revenue Code ("Canandaigua National Pension
Trusts").
A Qualified Trust may continue to participate in the Collective
Trust only so long as it continues to be a Qualified Trust.
Maintenance of Qualified Trust status is a prerequisite to all
transactions with the Collective Trust described below.
CANANDAIGUA NATIONAL IRAS
An individual who wishes to participate in the Collective
Trust through an IRA but who does not have a Canandaigua
National IRA must establish a Canandaigua National IRA. The
Canandaigua National IRA documents, which consist of an IRA
application, an IRA trust agreement with Canandaigua National
as trustee and an IRA disclosure statement describing
eligibility for, amounts of and deadlines for making
contributions to, and rules regarding distributions from, a
Canandaigua National IRA, can be obtained from any Canandaigua
National branch or by calling 1-800-724-2621 (Ext. 216).
Completed Canandaigua National IRA applications can be returned
in person to designated Canandaigua National branches or by
mail to the Canandaigua National Investment Department, 72
South Main Street, Canandaigua, New York 14424. For further
information, call Canandaigua National at 1-800-724-2621 (Ext.
216).
Once an individual has established a Canandaigua National
IRA, the individual may elect to have all or part of his/her
Canandaigua National IRA invested in one or both of the
Retirement Portfolios.
A Canandaigua National IRA under which Canandaigua
National acts as custodian rather than as trustee must be
modified so that Canandaigua National is acting as a trustee in
order for the Canandaigua National IRA to be entitled to invest
in one or more of the Retirement Portfolios. Such a
modification entails no costs to the holder of the IRA.
CANANDAIGUA NATIONAL PENSION TRUSTS
A Canandaigua National Pension Trust will be entitled to
invest in one or both of the Retirement Portfolios if it
contains an appropriate provision authorizing the investment of
all or a portion of its assets in a commingled trust maintained
by Canandaigua National, such as the Collective Trust.
Generally, each participant in a Canandaigua National Pension
Trust may elect to have all or part of his interest in the
Canandaigua National Pension Trust invested in one or both of
the Retirement Portfolios. However, this may vary, depending
upon the terms of the Canandaigua National Pension Trust. For
example, the employer who established the Canandaigua National
Pension Trust or a committee appointed by the employer may have
the power to decide whether to invest in one or both of the
Retirement Portfolios.
PURCHASES (ADMISSIONS)
A Qualified Trust which wishes to invest in one or both of
the Retirement Portfolios may purchase units of and will
thereby be admitted to participation in the Collective Trust by
completing the appropriate form to indicate that it wishes to
invest in the Collective Trust and, after the Canandaigua
National Investment Department has acknowledged receipt of the
form, calling the Canandaigua National Investment Department at
1-800-724-2621 (Ext. 216). In order for Canandaigua National
to invest all or a part of the assets of a Qualified Trust in
the Collective Trust, the amount to be so invested must have
been previously received by Canandaigua National as trustee of
the Qualified Trust. Because a Canandaigua National IRA may be
cancelled within seven days after it is set up, a Qualified
Trust may not invest in any Canandaigua National Investment
Department selection until this cancellation right no longer
exists. Because a cancellation is effective if mailed to
Canandaigua National on the seventh day, Canandaigua National
will not permit the purchase of any Canandaigua National
Investment Department selections until ten business days after
a Canandaigua National IRA has been opened. If a Qualified
Trust has not indicated on the appropriate form that it wishes
to invest in the Collective Trust, it may obtain a new form, on
which it may so indicate, from any Canandaigua National branch
or by calling 1-800-724-2621 (Ext. 216). Completed forms
should be returned to the Canandaigua National Investment
Department, 72 South Main Street, Canandaigua, New York 14424.
The minimum initial investment for the purchase of units
of each Retirement Portfolio is $250.00. Subsequent
investments are subject to a minimum of $50.00. All funds will
be invested in full and fractional units. The purchase price
for units of each Retirement Portfolio will be the net asset
value per unit next determined following processing of
instructions to invest in the Collective Trust. Net asset
value per unit of each Retirement Portfolio is determined by
dividing the total value of the Portfolio's assets, less any
liabilities, including the fee payable to the Trustee for
advisory and other services, by the number of units of the
Portfolio outstanding. Net asset value per unit is determined
at 9:00 a.m. each day, eastern time, based on the data
available as of 4:15 p.m. the previous business day. Purchases
of units are subject to determination by the Trustee that the
investment instructions are complete.
Because units are not transferable, certificates
representing units of the Collective Trust will not be issued.
All units purchased are confirmed to Participating Trusts and
credited to the accounts of the Participating Trusts on the
Collective Trust's records.
The Collective Trust reserves the right to its sole
discretion to: (i) suspend the availability of its units; and
(ii) to reject requests for purchases when in the judgment of
the Trustee such suspension or rejection is in the best
interest of the Collective Trust.
WITHDRAWALS (REDEMPTIONS)
All or a portion of the units held in the Collective Trust
can be withdrawn (redeemed) at any time. A Qualified Trust can
make withdrawals from the Collective Trust for the purpose of
changing to another available investment option other than the
Collective Trust by instructing Canandaigua National to
withdraw units on behalf of the Qualifying Trust. Payment for
units so withdrawn will be made to Canandaigua National as
trustee of the Qualified Trust. A withdrawal from the
Collective Trust may also be made for the purpose of making a
distribution from the Qualified Trust which is invested in the
Collective Trust. However, the time or times at which
distributions can be made from a Qualified Trust will depend on
the terms of the Qualified Trust.
CANANDAIGUA NATIONAL IRAS
If an individual who has established a Canandaigua
National IRA which is invested in the Collective Trust wishes
to make a withdrawal in order to receive a distribution from
the Canandaigua National IRA, the individual must also make an
appropriate request to receive a distribution from the
Canandaigua National IRA. The payment by Canandaigua National
from the Canandaigua National IRA will be made on the next
business day after Canandaigua National as trustee of the
Canandaigua National IRA receives the withdrawal from the
Collective Trust. (A request for a distribution from a
Canandaigua National IRA cannot be made by telephone. It can
be made only by giving Canandaigua National an appropriate
distribution request form.)
CANANDAIGUA NATIONAL PENSION TRUSTS
A withdrawal from the Collective Trust by a Canandaigua
National Pension Trust which is invested in the Collective
Trust may be made for the purpose of making a distribution to a
Participant under the Canandaigua National Pension Trust. The
payment by Canandaigua National from the Canandaigua National
Pension Trust will be made on the next business day after
Canandaigua National as trustee of the Canandaigua National
Pension Trust receives the withdrawal from the Collective
Trust. (A request for a distribution from a Canandaigua
National Pension Trust cannot be made by telephone. It can be
made only by giving Canandaigua National an appropriate
distribution request form and any other documents which
Canandaigua National reasonably requests.)
Distribution request forms can be obtained from any
Canandaigua National branch or by calling 1-800-724-2621 (Ext.
216). Completed forms and other documents can be returned in
person to designated Canandaigua National branches or by mail
to the Canandaigua National Investment Department, 72 South
Main Street, Canandaigua, New York 14424. For further
information, call Canandaigua National at 1-800-724-2621 (Ext.
216).
The withdrawal price will be the net asset value per unit
next computed after receipt of a withdrawal order. Net asset
value per unit of each Retirement Portfolio is determined by
dividing the total value of the Portfolio's assets, less any
liabilities, including the fee payable to the Trustee for
advisory and other services, by the number of units of the
Retirement Portfolio outstanding. Withdrawals and
distributions are subject to determination by Canandaigua
National that the investment instructions or the distribution
request form and other distribution documents, if any, are
complete. The value of a unit on withdrawal may be more or
less than the value upon purchase of the unit, depending upon
the value at the time of withdrawal of the assets in the
Retirement Portfolio from which the units are withdrawn.
Payment to Canandaigua National as trustee of a
Canandaigua National IRA or a Canandaigua National Pension
Trust for units withdrawn will normally be made within one
business day of receipt of instructions for withdrawal, but in
no event will payment be made more than seven calendar days
after receipt of instructions for withdrawal. Payment may also
be delayed or the right of withdrawal from either Retirement
Portfolio suspended at times when: (a) trading on the New York
Stock Exchange is restricted or it is closed, for other than
customary weekends and holidays; (b) an emergency, as defined
by rules of the SEC, exists making disposal of portfolio
securities or determination of the value of the net assets of a
Retirement Portfolio not reasonably practicable; or (c) the SEC
has by order permitted such suspension.
The failure of a Canandaigua National IRA or Canandaigua
National Pension Trust to continue to qualify as a Qualified
Trust could result from actions taken by the Participant, in
the case of a Canandaigua National IRA, or by the
administrators or fiduciaries of a Canandaigua National Pension
Trust. In that event, a determination of disqualification may
be made by the Internal Revenue Service or by a court. If at
any time a Canandaigua National IRA or Canandaigua National
Pension Trust no longer qualifies as a Qualified Trust,
Canandaigua National as trustee of the Canandaigua National IRA
or Canandaigua National Pension Trust will withdraw all units
of the Portfolio then held by the Canandaigua National IRA or
Canandaigua National Pension Trust at the net asset value next
determined after Canandaigua National is apprised of the
disqualification. Payment for units withdrawn upon
disqualification will be made in the same manner as described
in the preceding paragraph for payment for units withdrawn upon
request.
EXCHANGE PRIVILEGE
Units in either Retirement Portfolio may be exchanged
without cost for units in the other Retirement Portfolio.
Exchanges may be effected by calling the Canandaigua National
Investment Department at 1-800-724-2621 (Ext. 216).
Any exchange will be based on the respective net asset
values of the units involved next computed after receipt of an
exchange order. Exchanges are subject to determination by the
Trustee that the investment instructions are complete.
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ADMINISTRATION OF THE COLLECTIVE TRUST
SUPERVISORY COMMITTEE
The business and affairs of the Collective Trust are
managed under the direction of the Supervisory Committee. The
Supervisory Committee will perform the duties and undertake the
responsibilities of the board of directors of an investment
company.
THE TRUSTEE
Subject to the direction of the Supervisory Committee, The
Canandaigua National Bank and Trust Company, 72 South Main
Street, Canandaigua, New York 14424, a wholly-owned subsidiary
of Canandaigua National Corporation ("CNC"), acts as the
trustee of the Collective Trust and, as such, manages all of
the business and affairs of the Collective Trust, including
investment management and administration. Canandaigua National
is a commercial bank offering a wide range of banking services
to its customers in the Canandaigua, New York area. As of
December 31, 1996, Canandaigua National had assets of $361
million, loans of $255 million and deposits of $308 million,
and provided personal, corporate and institutional investment
management services for accounts having an aggregate market
value of approximately $297 million.
Canandaigua National has granted the Collective Trust the
non-exclusive right to use the words "Canandaigua National"
while the Collective Trust is engaged in business as a
registered investment company, which right may be terminated by
Canandaigua National in the event it ceases to serve as Trustee
of the Collective Trust.
INVESTMENT MANAGEMENT
Under the Management Agreement, the Trustee as investment
manager manages the investment of the assets of each Retirement
Portfolio in conformity with the stated objective and policies
of that Portfolio. It is the responsibility of the Trustee to
make investment decisions for the Retirement Portfolios and to
provide continuous supervision of their investment portfolios.
Canandaigua National provides these services principally
through its Investment and Trust Departments.
Within Canandaigua National's Investment and Trust
Departments, Gregory S. MacKay and Robert J. Swartout are
portfolio managers, respectively, for the Bond Portfolio and
the Equity Portfolio, and have been such since the inception of
the Collective Trust. Mr. MacKay is a Senior Vice President of
Canandaigua National and a member of the Collective Trust's
Supervisory Committee. Mr. Swartout is Vice President and
Investment Officer of Canandaigua National and a member of the
Collective Trust's Supervisory Committee. Both Mr. MacKay and
Mr. Swartout have been officers of Canandaigua National for
more than the past five years.
The investment management services of the Trustee to the
Collective Trust are not exclusive under the terms of the
Management Agreement. The Trustee is free to, and does, render
investment advisory services to others. Included among the
Investment and Trust Departments' accounts are personal
advisory accounts, trusts and estates, and pension and profit-
sharing funds for corporations. These accounts have varying
investment objectives.
The Investment Department of Canandaigua National has
responsibility for Canandaigua National's own investment
portfolio, which is composed primarily of United States
Government and tax-exempt securities. In acting for customers'
accounts, the personnel of the Investment and Trust Departments
independently consider their investment recommendations,
decisions or positions with respect to such accounts. The
Investment and Trust Departments will not execute any
transactions of the Collective Trust with Canandaigua National
or its affiliates and will only execute such transactions with
unaffiliated dealers.
Although it is unlikely, it is possible that the
commercial banking division of the Trustee may have deposit,
loan and other commercial banking relationships with issuers of
securities purchased by the Collective Trust, including
outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities purchased by the
Collective Trust in primary public offerings. The Collective
Trust will not purchase securities in any primary public
offering when the prospectus discloses that the proceeds will
be used for this purpose. The Collective Trust and Canandaigua
National will not act jointly to cause the Collective Trust to
make investments which could benefit other commercial interests
of Canandaigua National. The Trustee has advised the
Collective Trust that, in making investment decisions or
formulating investment recommendations, the Trust Department
will not obtain or use material inside information in the
possession of any other division or department of the Trustee
or from CNC or its subsidiaries or affiliates. The Trustee has
also advised the Collective Trust that its investment personnel
do not disclose any material inside information in their
possession to any other division or department of Canandaigua
National or to CNC or its subsidiaries or affiliates.
COMPENSATION OF THE TRUSTEE; EXPENSES
The Trustee has paid and will pay or reimburse the
Collective Trust for all costs and expenses arising in
connection with the organization of the Collective Trust,
including initial registration and qualification of the
Collective Trust and the units under the federal securities
laws and under other applicable regulatory requirements. The
Trustee also pays all expenses incurred by it in connection
with acting as investment manager, other than costs (including
taxes and brokerage commissions, if any) of securities
purchased for the Retirement Portfolios. Expenses incurred by
the Trustee in connection with acting as investment manager
include the costs of accounting, data processing, bookkeeping
and internal auditing services, other than costs related to
Unitholder account servicing, and rendering periodic and
special reports to the Supervisory Committee. The Trustee pays
for all employees, office space and facilities required by it
to provide services under the Management Agreement, except for
specific items of expense referred to below.
As compensation for these services, the Trustee is paid
with respect to each Retirement Portfolio a monthly management
fee at the annual rate of 1.00% of the average daily net assets
of such Retirement Portfolio. There is currently no separate
fee for establishing a Canandaigua National IRA or Canandaigua
National Pension Trust invested in the Collective Trust and no
fees or expenses for participation in the Collective Trust are
charged directly to the Participating Trusts. Canandaigua
National reserves the right to seek changes in the management
fee and to charge separate establishment and maintenance fees.
Any such changes would be made only after prior notice and, in
the case of the monthly management fee, after approval by the
Supervisory Committee and by the Unitholders.
Except for the expenses described above which have been
assumed by the Trustee or Canandaigua National, all expenses
incurred in administration of the Collective Trust are charged
to the Collective Trust or a particular Retirement Portfolio,
as the case may be, including the management fee; fees and
expenses of members of the Supervisory Committee who are not
affiliated with Canandaigua National; interest charges; taxes;
brokerage commissions; expenses of valuing assets; expenses of
continuing registration and qualification of the Collective
Trust and the units under federal and state law; expenses of
issue, withdrawal and exchange of units; fees and disbursements
of independent accountants and legal counsel; securities
depositories, transfer agents and Unitholder account servicing
organizations; expenses of preparing, printing and mailing
prospectuses (except printing and mailing of prospectuses to
persons who may establish Participating Trusts which are paid
by Canandaigua National), reports, proxies, notices and
statements sent to Participating Trusts; expenses of meetings
of Participating Trusts; association membership dues; and
insurance premiums. The Collective Trust is also liable for
nonrecurring expenses, including litigation to which the
Collective Trust is a party. Expenses incurred for the
operation of a particular Retirement Portfolio, including the
expenses of communications to Participating Trusts, are paid by
that Retirement Portfolio. Expenses that are general
liabilities of the Collective Trust are allocated among the
Retirement Portfolios in proportion to the total net assets of
each Retirement Portfolio in accordance with generally accepted
accounting principles.
The Trustee has agreed to reimburse the Collective Trust
for the amount by which the expenses of the Collective Trust
(including the management fee, but excluding interest, taxes,
brokerage commissions and extraordinary expenses) exceed the
lower of: (1) 1.5% of the average daily value of the Collective
Trust's net assets during such year; or (2) he most restrictive
expense limitation applicable to the Collective Trust imposed
by the securities laws of any state in which the Collective
Trust is sold. Currently, no limitation applicable to the
Collective Trust under any state law is lower than 1.5%.
GLASS-STEAGALL ACT CONSIDERATIONS
The Comptroller of the Currency has to date approved the
applications of several national banks to establish and
maintain collective investment funds, similar to the Collective
Trust, for the purpose of collectively investing assets
received by each bank as trustee of individual retirement
account trusts. In approving these applications, the
Comptroller determined that the commingling of retirement trust
assets by a national bank is a traditional bank fiduciary
service explicitly authorized by the Comptroller's own
regulations. The Comptroller also found that commingling of
individual retirement trust assets by a bank through the
vehicle of a collective investment fund was expressly
recognized and confirmed by Congress in enacting the Employee
Retirement Income Security Act of 1974; and that the
commingling of individual retirement trust assets as part of a
bona fide fiduciary service is consistent with the requirements
of the Glass-Steagall Act as construed by the United States
Supreme Court's 1971 decision in INVESTMENT COMPANY INSTITUTE
V. CAMP.
The Investment Company Institute ("ICI") filed lawsuits in
the United States District Court for the District of Columbia,
the United States District Court for the Northern District of
California, the United States District Court for the District
of Connecticut and the United States District Court for the
Western District of North Carolina challenging the
Comptroller's approval of certain of the aforementioned
applications. The ICI alleged, among other things, that the
Glass-Steagall Act prohibits a national bank from establishing
and maintaining a collective investment fund for the collective
investment of individual retirement trust account assets. The
United States Court of Appeals for the District of Columbia,
for the Second Circuit and for the Ninth Circuit, and the
District Court for the Western District of North Carolina, each
upheld the Comptroller's approval of a collective investment
fund. Thereafter, the United States Supreme Court denied the
ICI's request that the Supreme Court review the issues raised
in these lawsuits.
Canandaigua National has received an opinion of the
Comptroller of the Currency to the effect that the proposed
activities of the Collective Trust will not violate the Glass-
Steagall Act. In addition, the Comptroller has granted
Canandaigua National permission to operate the Collective Trust
and has waived the provisions of the Comptroller's regulations
(12 C.F.R 9.18(b)) to the extent necessary to permit compliance
by Canandaigua National and the Collective Trust with the
provisions of the Securities Act and the Investment Company
Act. Canandaigua National believes that it may properly
perform the investment advisory and administrative services
contemplated by the Portfolio's Declaration of Trust and the
Management Agreement and that Canandaigua National's personnel
may serve as members of the Supervisory Committee and as
officers of the Collective Trust without violating any section
of the Glass-Steagall Act or other applicable banking laws or
regulations. The members of the Supervisory Committee have
advised Canandaigua National that they are willing to serve as
such in reliance on the views of the Comptroller of the
Currency and Canandaigua National. However, future
administrative decisions or interpretations of present statutes
and regulations or changes in such statutes or regulations
could prevent Canandaigua National from continuing to perform
some or all of the services under the Collective Trust's
Declaration of Trust and the Management Agreement or prevent
its personnel from serving in such capacities.
If Canandaigua National personnel were prevented from
serving as members of the Supervisory Committee or as officers
of the Collective Trust, the Collective Trust would obtain non-
Canandaigua National personnel to serve. If the Comptroller's
decisions approving the establishment of collective funds for
the purpose of collectively investing individual retirement
trust assets were ultimately to be reversed, or if Canandaigua
National were otherwise prevented from performing any of the
services contemplated by the Declaration of Trust or the
Agreement, the Collective Trust could consider the situation at
that time and obtain another qualified person to perform the
services or seek approval of the Participating Trusts to
discontinue the Collective Trust. In such case, Canandaigua
National has agreed to pay or reimburse the Collective Trust
for all out-of-pocket expenses of the Collective Trust
associated with finding another qualified person to perform
services for the Collective Trust or to discontinue the
Collective Trust. If the Collective Trust is discontinued,
Participating Trusts will suffer no adverse tax consequences as
long as assets are not distributed from a Canandaigua National
IRA or Canandaigua National Pension Trust or, if a distribution
is made, the distribution is reinvested in another individual
retirement account or qualified retirement plan. If the
Collective Trust is discontinued, a Participating Trust may
realize a loss if the amount received upon the discontinuance
of the Collective Trust, which would be based on the market
value of the securities in the Retirement Portfolio in which a
Participating Trust is invested, is less than the amount
invested.
TAX INFORMATION
It is intended that the Collective Trust will be exempt
from Federal income tax under Section 408(e) of the Internal
Revenue Code with respect to interests in the Collective Trust
which are attributable to individual retirement trust accounts
maintained in conformity with Section 408(e) of the Internal
Revenue Code and that the Collective Trust will be exempt from
Federal income tax under Section 501(a) of the Internal Revenue
Code with respect to interests in the Collective Trust which
are attributable to pension or profit-sharing trusts (including
those benefiting self-employed individuals) maintained in
conformity with Section 401(a) of the Internal Revenue Code.
It is also intended that the Collective Trust will not be
subject to taxation in New York State. For federal income tax
purposes, income earned by the Collective Trust will not be
taxable to Participating Trusts or Participants until a
Participant receives a distribution from the Collective Trust.
Withdrawals from the Collective Trust which are paid to
Participating Trusts can be made at any time by Participating
Trusts without penalty and without the amount withdrawn being
subject to Federal income tax. Reference should be made to
"TAX INFORMATION" in the Statement of Additional Information
for a more complete description of certain federal tax laws
applicable to Qualified Trusts and the Collective Trust,
including the effect of the Tax Reform Act of 1986 on
contributions to the Collective Trust and distributions from
the Collective Trust. Such information describes only certain
federal tax considerations. It does not describe other tax
laws such as state or local taxes, and does not describe fully
taxation of distributions from a Qualified Trust. Participants
who maintain a Canandaigua National IRA should read carefully
the Canandaigua National IRA disclosure statement (the
individual retirement account disclosure statement required by
Internal Revenue Service regulations) for more complete
information and should consult their individual tax advisers.
The tax consequences of participation in the Collective Trust
will also depend, in part, upon the facts and circumstances of
the individual Participant or Qualified Trust, and each
Participant in the Qualified Trust.
PERFORMANCE DATA
From time to time the Collective Trust may include the
average annual total return on its Bond Portfolio or Equity
Portfolio for various specified time periods in advertisements
or information furnished to present or prospective Unitholders.
Average annual total return is computed in accordance with
formulas specified by the SEC.
Average annual total return quotations for the specified
period will be computed by finding the average annual
compounded rates of return (based on net investment income and
any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the
initial amount invested to the redeemable value of such
investment at the end of each period. Average annual total
return will be computed assuming all dividends and
distributions are reinvested and taking into account all
applicable recurring and nonrecurring expenses.
The Collective Trust also may quote total return and
aggregate total return performance data on its Bond Portfolio
or Equity Portfolio for various specified time periods. Such
data will be calculated substantially as described above,
except that the rates of return calculated will not be average
annual rates, but rather, actual annual, annualized or
aggregate rates of return. Actual annual or annualized total
return data generally will be lower than average annual total
return data since the average annual rates of return reflect
compounding; aggregate total return data generally will be
higher than average annual total return data since the
aggregate rates of return reflect compounding over a longer
period of time. Total return may be expressed either as a
percentage or as a dollar amount in order to illustrate such
total return on a hypothetical $1,000 investment at the
beginning of each specified period.
Total return figures are based on the Collective Trust's
historical performance and are not intended to indicate future
performance. The total return on the Bond Portfolio and the
Equity Portfolio will vary depending on market conditions, the
securities comprising the Collective Trust's portfolio, the
Collective Trust's operating expenses and the amount of
realized and unrealized net capital gains or losses during the
period. The value of an investment in the Collective Trust
will fluctuate and a Unitholder's shares, when redeemed, may be
worth more or less than their original cost.
On occasion, the Collective Trust may compare the
performance of its Bond Portfolio or Equity Portfolio to that
of the Standard & Poor's 500 Composite Stock Price Index, the
Value Line Composite Index, the Lehman Brothers Intermediate
Government/Corporate Bond Index, the Dow Jones Industrial
Average, or other indices, or to data contained in publications
such as Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, U.S. News & World Report,
Business Week, Forbes, Fortune and CDA Investment Technology,
Inc. As with other performance data, performance comparisons
should not be considered representative of the relative
performance of the Bond Portfolio or Equity Portfolio for any
future period.
GENERAL INFORMATION
DESCRIPTION OF VOTING RIGHTS
The Declaration of Trust provides that the Collective
Trust may issue an unlimited number of units of beneficial
interest without par value which may be divided into separate
"classes" designated as Retirement Portfolios. The classes are
treated as series for the purposes of the Investment Company
Act and are referred to elsewhere in this Prospectus as
Retirement Portfolios. The Declaration of Trust permits the
Trustee to create an unlimited number of Retirement Portfolios
and, with respect to each Retirement Portfolio, to issue an
unlimited number of full and fractional units of beneficial
interest of that Collective Trust. Each class of units
designated as a separate Retirement Portfolio represents a
separate pool of assets. Currently the Collective Trust is
offering units of beneficial interest in two Retirement
Portfolios: the Bond Portfolio and the Equity Portfolio. The
Trustee may classify or reclassify units into one or more
Retirement Portfolios so long as such classification or re-
classification does not have a material adverse effect on the
Participating Trusts which own the units.
The units of each Retirement Portfolio are fully paid and
non-assessable and have no preference as to conversion,
exchange, dividends, retirement or other features. The units
of each Retirement Portfolio have no preemptive rights. Each
Participating Trust is entitled to exercise the voting rights
of the units registered in the name of the Participating Trust
or the nominee thereof. A Participating Trust is entitled to
one vote for each full unit (and a fractional vote for each
fractional unit) outstanding on the records of the Collective
Trust in the name of the Participating Trust or the nominee
thereof. The units of each Retirement Portfolio have non-
cumulative voting rights, which means that the holders of more
than 50% of the units voting for the election of the
Supervisory Committee can elect 100% of the Supervisory
Committee if they choose to do so. On any matter submitted to
a vote of the Participating Trusts, all units of the Collective
Trust then issued and outstanding and entitled to vote,
irrespective of the class, will be voted in the aggregate and
not by class except: (i) when required by the Investment
Company Act, units shall be voted by individual classes; and
(ii) when the matter affects an interest of less than all
classes, then only Participating Trusts which own units of the
affected class or classes shall be entitled to vote thereon.
Units vote in the aggregate on matters such as the election of
directors; whereas, units are voted by class on matters such as
the approval of the Management Agreement and changing certain
investment restrictions.
As used in this Prospectus, when referring to the
approvals to be obtained from Participating Trusts in
connection with matters affecting all of the Retirement
Portfolios, the term "majority" means the vote of the lesser
of: (1) 67% of the Collective Trust's outstanding units present
at a meeting; or (2) more than 50% of the Collective Trust's
outstanding units. When referring to the approvals to be
obtained from Participating Trusts in connection with matters
affecting less than all of the Retirement Portfolios, the term
"majority" means the vote of the lesser of: (1) 67% of each
Portfolio's outstanding units present at a meeting: or (2) more
than 50% of each portfolio's outstanding units.
Voting rights will be exercised for all Participating
Trusts as follows: (i) for each Canandaigua National IRA, by
the accountholder, and (ii) for all other Participating Trusts,
as directed in the governing instrument for the Participating
Trust.
The Collective Trust will hold annual meetings of
Unitholders for the purpose of electing Supervisory Committee
members and such other purposes as may be required by law or
decided upon by the Supervisory Committee.
No document shall be issued evidencing any interest in the
Collective Trust. No Participating Trust shall have the power
to sell, assign or transfer any unit or all or any part of its
equity or interest in the Collective Trust or use it as
security for a loan.
PARTICIPANT LIABILITY
Participating Trusts may be subject to liability for
obligations of the Collective Trust under the laws of some
jurisdictions. Therefore, the Declaration of Trust contains a
disclaimer of liability of Participating Trusts and requires
notice of such disclaimer be given in each obligation entered
into or executed by the Trustee. It also provides for an
indemnification out of Collective Trust property for any
Participating Trust held personally liable for the obligations
of the Collective Trust.
CUSTODIAN AND UNITHOLDER ACCOUNT SERVICER
Northern Trust Company acts as custodian of the assets of
the Collective Trust. Canandaigua National acts as Unitholder
account servicer. Canandaigua National is not paid any fee for
these services but is reimbursed for the expenses which it
incurs to perform them.
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APPENDIX
Description of Standard & Poor's Corporation's corporate bond
ratings of BBB or better:
AAA - Bonds rated AAA have the
highest rating assigned by
S&P 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 to a 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.
Description of Moody's Investor Service, Inc.'s corporate bond
ratings of Baa or better:
AAA - Bonds which are rated Aaa
are judged to be 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 Aaa securities.
A - Bonds which are rated A
possess many favorable
investment attributes and
are to be considered as
upper medium grade
obligations. Factors giving
security to principal and
interest are considered
adequate but elements may be
present which suggest a
susceptibility to impairment
sometime in the future.
BAA - Bonds which are rated Baa
are considered as medium
grade obligations, i.e.,
they are neither highly
protected nor poorly
secured. Interest payments
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.
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PART B
STATEMENT OF ADDITIONAL INFORMATION
CANANDAIGUA NATIONAL COLLECTIVE INVESTMENT FUND FOR QUALIFIED
TRUSTS
This Statement of Additional Information sets forth
certain information with respect to units offered by
Canandaigua National Collective Investment Fund for Qualified
Trusts (the "Collective Trust"), an open-end diversified
management investment company.
_____________________________
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
THE INFORMATION HEREIN SHOULD BE READ IN CONJUNCTION WITH THE
COLLECTIVE TRUST'S PROSPECTUS DATED APRIL 29, 1997, A COPY OF
WHICH MAY BE OBTAINED BY CALLING THE CANANDAIGUA NATIONAL
INVESTMENT DEPARTMENT AT 1-800-724-2621 (EXT. 216).
April 29, 1997
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<PAGE>
TABLE OF CONTENTS
PAGE NO.
THE COLLECTIVE TRUST 3
INVESTMENT RESTRICTIONS 3
OTHER INVESTMENT POLICIES 5
ADMINISTRATION OF THE COLLECTIVE TRUST 6
Supervisory Committee and Officers 6
Compensation of the Supervisory Committee 7
The Trustee 7
Investment Management 7
Administration and Account Services 7
Compensation of the Trustee; Expenses 8
Term of the Management Agreement 9
VALUATION OF UNITS 9
TAX INFORMATION 10
Participating Trusts 10
Canandaigua National IRAs 10
Retirement Plans 14
The Collective Trust 15
PORTFOLIO TRANSACTIONS 16
GENERAL INFORMATION 17
Termination of the Collective Trust 17
Custodian and Unitholder Account Servicer 17
Principal Holders of Units 17
COUNSEL AND INDEPENDENT ACCOUNTANTS 18
REPORT OF INDEPENDENT ACCOUNTANTS F-1
FINANCIAL STATEMENTS AND NOTES THERETO F-2
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THE COLLECTIVE TRUST
The Canandaigua National Collective Investment Fund for
Qualified Trusts (the "Collective Trust"), also known as the
Canandaigua National Bank Retirement Portfolios, is registered
with the SEC as an open-end diversified management investment
company. The Canandaigua National Bank and Trust Company is
the Trustee (in such capacity, the "Trustee", otherwise
"Canandaigua National") of the Collective Trust. For purposes
of the Securities Act, Canandaigua National may be considered
by the SEC to be the principal underwriter for the Collective
Trust.
Generally, for Federal income tax purposes, money invested
in the Collective Trust and income earned by the Collective
Trust will not be taxable to an investor until such investor
receives a distribution from the Collective Trust. Since
January 1, 1987, contributions by certain investors to
individual retirement accounts have not been deductible.
However, the income earned on such contributions has not been
taxable to the investor until the investor receives a
distribution from the Participating Trust. The Collective
Trust consists of two Retirement Portfolios, each with a
different investment objective, for investment of retirement
funds held in certain Qualified Trusts. "Qualified Trusts"
include individual retirement trust accounts established under
trust agreements with Canandaigua National as trustee
("Canandaigua National IRAs"), and single or commingled pension
or profit-sharing trusts, including corporate pension or
profit-sharing trusts and pension or profit-sharing trusts
benefiting one or more self-employed individuals (generally
referred to as HR 10 or Keogh plans), established under trust
agreements with Canandaigua National as trustee ("Canandaigua
National Pension Trusts). Qualified Trusts may select one or
more Retirement Portfolios and may transfer retirement funds
from one Retirement Portfolio to another.
The BOND PORTFOLIO seeks to earn a high level of current
income with consideration also given to safety of principal.
The EQUITY PORTFOLIO seeks long term growth of asset
values through capital appreciation and dividend income.
INVESTMENT RESTRICTIONS
The following restrictions and fundamental policies cannot
be changed for any Retirement Portfolio without the approval of
the holders of a majority of the outstanding units of the
affected Retirement Portfolio or Retirement Portfolios. The
Collective Trust may not:
(a) Purchase securities of any issuer (except securities
issued or guaranteed as to principal or interest by the United
States Government, its agencies or instrumentalities) for a
Retirement Portfolio if as a result more than 5% of the value
of the total assets of that Retirement Portfolio would be
invested in the securities of such issuer or all Retirement
Portfolios together would own more than 10% of the outstanding
voting securities of such issuer; for purposes of this
limitation, identification of the "issuer" will be based on a
determination of the source of assets and revenues committed to
meeting interest and principal payments of each security;
(b) Invest in companies for the purpose of exercising
control;
(c) Borrow money in any Retirement Portfolio except for
temporary purposes and then only in an amount not exceeding 5%
of the value of the total assets of that Retirement Portfolio.
The Collective Trust will repay all borrowings in any
Retirement Portfolio before making additional investments for
that Retirement Portfolio and interest paid on such borrowings
will reduce income;
(d) Pledge, mortgage or hypothecate the assets of any
Retirement Portfolio to any extent greater than 10% of the
value of the total assets of that Retirement Portfolio;
(e) Issue senior securities;
(f) Underwrite any issue of securities;
(g) Purchase or sell real estate or real estate mortgage
loans, but this shall not prevent investments in instruments
secured by real estate or interests therein or in marketable
securities in real estate operations;
(h) Make loans to other persons, except the Collective
Trust may make time or demand deposits with banks, may purchase
bonds, debentures or similar obligations that are publicly
distributed, may loan portfolio securities in a Retirement
Portfolio not in excess of 10% of the value of the total assets
of that Retirement Portfolio and may enter into repurchase
agreements as long as repurchase agreements maturing in more
than seven days entered into for a particular Retirement
Portfolio do not exceed 10% of the value of the total assets of
the Retirement Portfolio;
(i) Purchase on margin or sell short;
(j) Purchase or retain securities of an issuer if those
members of the Supervisory Committee, each of whom owns more
than 1/2 of 1% of such securities, together own more than 5% of
the securities of such issuer;
(k) Purchase or sell commodities or commodity contracts;
(l) Invest its assets in securities of other investment
companies except as part of a merger, consolidation,
reorganization or purchase of assets approved by the
Participants;
(m) Except as may be permitted by clause (k), invest in
or sell put, call, straddle or spread options or interests in
oil, gas or other mineral exploration or development programs;
(n) Purchase any securities for a Retirement Portfolio
that would cause more than 25% of the value of that Retirement
Portfolio's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting
their principal activities in the same industry except that
there is no limitation with respect to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities;
(o) Invest the assets of any Retirement Portfolio in
nonmarketable securities (including repurchase agreements and
time deposits maturing in more than seven days but excluding
master demand notes and other securities payable on demand) to
any extent greater than 10% of the value of the total assets of
that Retirement Portfolio. If through the appreciation of
nonmarketable securities, or the depreciation of marketable
securities, a Retirement Portfolio has more than 10% of its
assets invested in nonmarketable securities, the Retirement
Portfolio will reduce its holdings of nonmarketable securities
to 10% or less of its total assets as soon as practicable;
(p) Purchase securities of any issuer that has a record
of less than three years continuous operation if such purchase
would cause more than 5% of the value of that Retirement
Portfolio's total assets at the time of such purchase to be
invested in securities of such issuers.
(q) Purchase securities of foreign issuers; or
(r) Purchase puts, calls or engage in other futures
contracts.
If a percentage restriction is adhered to at the time of
investment, then except as noted in (i) above, a later increase
or decrease in percentage resulting from a change in values or
assets will not constitute a violation of that restriction.
OTHER INVESTMENT POLICIES
The Collective Trust will not invest in securities which
are subject to restrictions on resale because they have not
been registered under the Securities Act or which are not
readily marketable, except for master demand notes, other
securities payable upon demand, repurchase agreements and
instruments evidencing loans of securities. Such securities
may, however, become a part of a Retirement Portfolio's assets
through a merger, exchange or recapitalization involving
securities already held in a Retirement Portfolio.
Neither of the Retirement Portfolios plans to purchase
securities solely for the purpose of short-term trading. The
turnover rate for a Retirement Portfolio will not be a factor
preventing sale or purchase when the Trustee believes
investment considerations warrant such sale or purchase. The
Collective Trust expects that the annual portfolio turnover
rate over a term of years will not exceed 100% for any
Retirement Portfolio, although the rate may exceed 100% in some
years. This does not include short-term securities.
Any Retirement Portfolio may, to the extent consistent
with its investment objectives, invest in master demand notes.
A master demand note is a facility, typically maintained by a
bank, pursuant to which monies are lent on a daily basis to a
corporate borrower by a group of purchasers in amounts and at
rates negotiated daily. The loan is payable on demand. As
with other debt obligations, there is a risk that the borrower
will fail to repay the obligation.
The foregoing investment objectives and policies are not
fundamental and may be changed by the Trustee without the
approval of the holders of a majority of the outstanding units
of the affected Retirement Portfolio or Portfolios.
ADMINISTRATION OF THE COLLECTIVE TRUST
SUPERVISORY COMMITTEE AND OFFICERS
The members of the Supervisory Committee, officers of the
Collective Trust, their principal occupations for the last five
years and their affiliations, if any, with Canandaigua National
are as follows:
ROBERT N. COE, MEMBER OF THE SUPERVISORY COMMITTEE.
47 President and co-owner of W.W. Coe &
31189 Oakmount Son, Inc., an independent insurance
Road agency founded in 1862, Canandaigua,
Holcomb, NY NY (W.W. Coe & Son, Inc. owns 50
14469 shares of common stock of Canandaigua
National Corporation, the parent
holding company of Canandaigua
National ("CNC"), constituting 0.06%
of CNC's outstanding stock. Mr. Coe
has waived his interest in such
shares.)
ROBERT J. CHAIRMAN OF THE SUPERVISORY COMMITTEE.
CRAUGH, 74 Retired since 1987; prior thereto
25 Deerfield Senior Vice President-Operations of
Drive Canandaigua National. (Mr. Craugh
Canandaigua, NY owns 535 shares of common stock of
14424 CNC, his spouse owns 540 shares and he
and spouse jointly own 172 shares.
Such shares altogether constitute
1.56% of CNC's common stock.)
DONALD C. MEMBER OF THE SUPERVISORY COMMITTEE.
GREENHOUSE, 61 Since November, 1989, President and
108 Cliffside owner of Seneca Point Associates,
Drive Inc., a business consulting firm in
Canandaigua, NY Canandaigua, NY; prior thereto
14424 Executive Vice President, Voplex
Corporation; Rochester, NY.
GREGORY S. TREASURER, MEMBER OF THE SUPERVISORY
MACKAY*, 47 COMMITTEE. Treasurer CNC and Senior
5151 Laura Lane Vice President of Canandaigua
Canandaigua, NY National.
14424
ROBERT J. SECRETARY, MEMBER OF THE SUPERVISORY
SWARTOUT*, 35 COMMITTEE. Vice President and
1280 Fairway 7 Investment Officer, Canandaigua
Macedon, NY National.
14502
____________
* Indicates that such person is an "interested person" of the
Collective Trust within the meaning of the Investment Company
Act. Mr. Craugh is not deemed to be an interested person
within the meaning of the Investment Company Act, but is deemed
an interested person by the United States Comptroller of the
Currency.
The members of the Supervisory Committee and the officers
of the Collective Trust, as a group, own less than 1% of the
outstanding units of the Collective Trust.
COMPENSATION OF THE SUPERVISORY COMMITTEE. Members of the
Supervisory Committee who are not officers of Canandaigua
National receive $200.00 from the Collective Trust and
reasonable expenses for each Supervisory Committee meeting
attended. Members of the Supervisory Committee who are officers
of Canandaigua National receive no compensation from the
Collective Trust.
THE TRUSTEE
Subject to the direction of the Supervisory Committee, The
Canandaigua National Bank and Trust Company, 72 South Main
Street, Canandaigua, New York 14424, a wholly-owned subsidiary
of the Canandaigua National Corporation ("CNC"), acts as the
Trustee of the Collective Trust and, as such, manages all of
the business and affairs of the Collective Trust.
INVESTMENT MANAGEMENT. The Management Agreement dated as
of October 6, 1992, between Canandaigua National and the
Collective Trust (the "Management Agreement") was approved by
the Supervisory Committee on October 6, 1992 and by the initial
Participating Trust on October 7, 1992. Under the Management
Agreement, the Trustee as investment manager manages the
investment of the assets of each Retirement Portfolio in
conformity with the stated objective and policies of that
Portfolio. It is the responsibility of the Trustee to make
investment decisions for the Retirement Portfolios and to
provide continuous supervision of their investment portfolios.
The investment management services of the Trustee to the
Collective Trust are not exclusive under the terms of the
Management Agreement. The Trustee is free to, and does, render
investment advisory services to others. Included among the
Trust Department's accounts are personal advisory accounts,
trusts and estates, and pension and profit-sharing funds for
corporations, as well as commingled trust funds, registered
investment companies and a broad spectrum of institutional
accounts. These accounts have varying investment objectives.
Under the terms of the Management Agreement, the Trustee
is obligated to manage the Retirement Portfolios in accordance
with applicable laws and regulations, including the regulations
and rulings of the United States Comptroller of the Currency
relating to fiduciary powers of national banks. In accordance
with these regulations, the Trustee will not invest the
Retirement Portfolios' assets in stock or obligations of, or
property acquired from, Canandaigua National, its affiliates or
directors, officers or employees or other persons with
substantial connections with Canandaigua National, and assets
of the Retirement Portfolios shall not be sold or transferred,
by loan or otherwise, to Canandaigua National or persons
connected with Canandaigua National as described above, except
that in accordance with Section 5.2(c) of the Declaration of
Trust and applicable regulations of the Comptroller of the
Currency, the Retirement Portfolios' assets may be placed in
deposits with Canandaigua National pending investment or
distribution.
ADMINISTRATION AND ACCOUNT SERVICES. The Trustee also
performs certain administration and account servicing functions
under the Management Agreement. These services include
preparation and distribution of communications to the
Participating Trusts, accounting and recordkeeping. The
Trustee pays the cost of supplying necessary employees, office
space and facilities for these services.
COMPENSATION OF THE TRUSTEE; EXPENSES. The Trustee has
paid and will pay or reimburse the Collective Trust for all
costs and expenses arising in connection with the organization
of the Collective Trust, including initial registration and
qualification of the Collective Trust and the units under the
Federal securities laws and under other applicable regulatory
requirements. The Trustee also pays all expenses incurred by
it in connection with acting as investment manager, other than
costs (including taxes and brokerage commissions, if any) of
securities purchased for the Retirement Portfolios. Expenses
incurred by the Trustee in connection with acting as investment
manager include the costs of accounting, data processing,
bookkeeping and internal auditing services, other than costs
related to Unitholder account servicing, and rendering periodic
and special reports to the Supervisory Committee. The Trustee
pays for all employees, office space and facilities required by
it to provide services under the Management Agreement, except
for specific items of expense referred to below. Canandaigua
National pays for all marketing and advertising expenses of the
Collective Trust. The Collective Trust's assets are not used
to pay the costs of distribution.
For its services under the Management Agreement, the
Trustee is paid with respect to each Retirement Portfolio a
monthly management fee at the annual rate of 1.00%. There is
currently no separate fee for establishing a Canandaigua
National IRA or Canandaigua National Pension Trust whose assets
are invested in the Collective Trust, and no fees or expenses
are charged directly to the Participating Trusts for
participation in the Collective Trust.
Except for the expenses described above which have been
assumed by the Trustee or Canandaigua National, all expenses
incurred in administration of the Collective Trust are charged
to the Collective Trust or a particular Retirement Portfolio,
as the case may be, including the management fee; fees and
expenses of members of the Supervisory Committee who are not
officers of Canandaigua National; interest charges; taxes;
brokerage commissions; expenses of valuing assets; expenses of
continuing registration and qualification of the Collective
Trust and the units under federal and state law; expenses of
issue, withdrawal and exchange of units; fees and disbursements
of independent accountants and legal counsel; fees and expenses
of custodians, including subcustodians and securities
depositories, transfer agents and Unitholder account servicing
organizations; expenses of preparing, printing and mailing
prospectuses (except printing and mailing of prospectuses to
persons who may establish Participating Trusts), reports,
proxies, notices and statements sent to Participating Trusts;
expenses of meetings of Participating Trusts; association
membership dues; and insurance premiums. The Collective Trust
is also liable for nonrecurring expenses, including litigation
to which the Collective Trust is a party. Expenses incurred
for the operation of a particular Retirement Portfolio
including the expenses of communications to Participating
Trusts, are paid by that Retirement Portfolio. Expenses that
are general liabilities of the Collective Trust are allocated
among the Retirement Portfolios in proportion to the total net
assets of each Retirement Portfolio.
The Trustee has agreed to reimburse the Collective Trust
for the amount by which the expenses of the Collective Trust
(including the management fee, but excluding interest, taxes,
brokerage commissions and extraordinary expenses) exceed the
lower of (i) 1.5% of the average daily value of the Collective
Trust's net assets during such year or (ii) the most
restrictive expense limitation applicable to the Collective
Trust imposed by the securities laws of any state in which the
Collective Trust is sold. Currently, no limitation applicable
to the Collective Trust under any state law is lower than 1.5%.
TERM OF THE MANAGEMENT AGREEMENT. The Management
Agreement will remain in effect as to each Retirement Portfolio
until April 30, 1998 and from year to year thereafter if its
continuance is approved annually either by the Supervisory
Committee or by the vote of a majority of the outstanding units
of such Retirement Portfolio and by a majority of the members
of the Supervisory Committee who are not parties to the
Agreement or "interested persons" of a party. The Agreement
can be terminated as to any Retirement Portfolio on 60 days'
notice given at any time and will terminate automatically if it
is assigned.
VALUATION OF UNITS
Net asset value per unit of each Retirement Portfolio is
determined by dividing the total value of the Retirement
Portfolio's assets, less any liabilities including the fee
payable to the Trustee for advisory and other services, by the
number of units of the Retirement Portfolio outstanding.
The Trustee determines the value of the assets held in
each Retirement Portfolio at 9:00 a.m. each day, eastern time,
based on the data available as of 4:15 p.m. the previous
business day. (The following days are holidays on the New York
Stock Exchange: January 1 New Year's Day, February (third
Monday) Washington's Birthday, March or April (Friday before
Easter) Good Friday, May (last Monday) Memorial Day, July 4
Independence Day, September (first Monday) Labor Day, November
(fourth Thursday) Thanksgiving Day, December 25 Christmas Day.)
Except for debt securities with remaining maturities of 60 days
or less, assets for which market quotations are available are
valued as follows: (a) each listed security is valued at its
closing price obtained from the respective primary exchange on
which the security is listed, or, if there were no sales on
that day, at its last reported current bid price; (b) each
unlisted security is valued at the last current bid price
obtained from the NASDAQ; (c) United States Government and
agency obligations are valued based upon bid quotations from
the Federal Reserve Bank for identical or similar obligations;
(d) short-term money market instruments (such as certificates
of deposit, bankers' acceptances and commercial paper) are most
often valued by bid quotation or by reference to bid quotations
of available yields for similar instruments of issuers with
similar credit ratings. The Supervisory Committee has
determined that the values obtained using the procedures
described in (c) and (d) represent the fair values of the
securities valued by such procedures. All of these prices are
obtained by the Collective Trust from services which collect
and disseminate such market prices. Bid quotations for short-
term money market instruments reported by such a service are
the bid quotations reported to it by the major dealers.
Debt securities with remaining maturities of 60 days or
less are valued on the basis of amortized cost. Under this
method of valuation, the security is initially valued at cost
on the date of purchase or, in the case of securities purchased
with more than 60 days remaining to maturity, the market value
on the 61st day prior to maturity. Thereafter the Collective
Trust assumes a constant proportionate amortization in value
until maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the
security, unless the Supervisory Committee determines that
amortized cost no longer represents fair value.
When approved by the Supervisory Committee, certain
securities may be valued on the basis of valuations provided by
an independent pricing service when such prices are believed by
the Supervisory Committee to reflect the fair value of such
securities. These securities would normally be those which
have no available recent market value, have few outstanding
shares and therefore infrequent trades, or for which there is a
lack of consensus on the value, with quoted prices covering a
wide range. The lack of consensus would result from relatively
unusual circumstances such as no trading in the security for
long periods of time, or a company's involvement in merger or
acquisition activity, with widely varying valuations placed on
the company's assets or stock. Prices provided by an
independent pricing service may be determined without exclusive
reliance on quoted prices and may take into account appropriate
factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data.
In the absence of an ascertainable market value, assets
are valued at their fair value as determined by the Trustee
using methods and procedures reviewed and approved by the
Supervisory Committee.
The Collective Trust does not declare and pay dividends of
its investment income or distribute gains, if any, from the
sale of securities. Income earned on assets in a Retirement
Portfolio is included in the total value of such Portfolio's
assets. Interest income on debt securities is accrued and added
to asset value daily. Dividend income is recognized and added
to asset value on the ex-dividend date.
TAX INFORMATION
PARTICIPATING TRUSTS
Canandaigua National IRAs
The Internal Revenue Code of 1986 (the "Code") permits a
personal income tax deduction for contributions made under an
IRA which is maintained in conformity with Section 408(a) of
the Code. The Code also allows a tax-free rollover of certain
distributions from, or a tax-free transfer of certain interests
in, another individual retirement account or individual
retirement annuity or a tax-free rollover of certain
distributions from a qualified retirement plan to an IRA.
Only the person establishing an IRA can own the IRA. No
part of a Participant's interest under an IRA can be forfeited.
Except in the case of a transfer to a Participant's spouse in
connection with a divorce, a Participant's interest in his or
her IRA cannot be transferred to another person. The Code also
provides rules for distributions if the Participant dies before
his or her entire interest in the IRA has been distributed.
CONTRIBUTIONS. Subject to the limitations described
below, an individual can deduct from federal gross income the
amount of contributions to an IRA made for a tax year, whether
or not other deductions are itemized. The maximum amount of the
contributions deductible for each tax year to an IRA is 100% of
the individual's compensation, or earned income in the case of
a self-employed person, for that year up to $2,000. Amounts
transferred or rolled over from another individual retirement
account or individual retirement annuity or from a qualified
retirement plan into the IRA are not subject to this limit on
deductible contributions. (The Code also permits annual
deductions for contributions to an IRA on behalf of an
individual and his or her nonworking spouse under separate IRAs
of up to $4,000, but no more than 100% of the working spouse's
compensation or earned income and no more than $2,000 may be
allocated each year to either spouse's IRA. This deduction is
permitted if the individual's spouse either has no compensation
or, for purposes of IRA deductions, elects to be treated as if
he or she has no compensation.) In cases where both spouses
work, each can contribute to a separate IRA and deduct up to
the maximum of 100% of his or her compensation or earned income
up to $2,000 each tax year.
Contributions to an IRA are deductible for a tax year if
made up to the deadline for filing a federal income tax return
for that tax year (excluding extensions). Except with respect
to a simplified employee pension program (described further
below), no deduction for contributions is allowed for the tax
year in which an individual becomes age 70 1/2 or any later
tax year.
If an individual or an individual's spouse is an active
participant in an employer maintained retirement plan, the
individual and his spouse may be unable to deduct all or a
portion of their IRA contributions. The deduction will be
totally eliminated if the individual's adjusted gross income
exceeds $35,000 ($50,000 for married couples filing a joint
return). If the individual's adjusted gross income is between
$25,000 and $35,000 (between $40,000 and $50,000 for married
couples filing a joint return), the individual and the
individual's spouse will be able to deduct a portion of their
IRA contributions. However, in either case, to the extent that
an IRA contribution is not fully deductible, and subject to the
limitations described above on the maximum permissible IRA
contribution, an individual will be able to make a non-
deductible IRA contribution. If the individual's adjusted
gross income is less than $25,000 (less than $40,000 for
married couples filing a joint return), both the individual and
the individual's spouse will be able to deduct their entire IRA
contribution. An employer maintained retirement plan is
generally any qualified pension, profit sharing, or stock bonus
plan, a Section 403(b) annuity plan, a SEP, a SIMPLE Plan, or a
plan established for its employees by the United States, a
State or any political subdivision, agency or instrumentality
of the United States or a State.
EXCESS CONTRIBUTIONS. If contributions for a year exceed
the $2,000/100% of compensation limit described above, an
individual is subject to a 6% penalty tax on the amount of the
contribution which is in excess of the limits. This penalty
tax can be avoided by withdrawing the excess amount and any
earnings on the excess amount before the deadline for filing
the individual's federal income tax return for the tax year for
which the excess contribution was made.
DISTRIBUTIONS. For federal income tax purposes,
retirement funds invested in the Collective Trust through a
Qualified Trust which is a Canandaigua National IRA and the
income earned by the Collective Trust will not be taxable to
the Canandaigua National IRA. Additionally, the income earned
by the Collective Trust will not be taxable to the Participant
until the Participant receives a distribution from the
Canandaigua National IRA. Distributions from an IRA are taxed
as ordinary income when received. If a distribution other than
for death or disability is made before a Participant is age
59 1/2 , the amount of the distribution may be subject to a
penalty tax, unless the distribution is used to pay medical
expenses in excess of 7.5% of adjusted gross income.
Additionally, the penalty will not apply to IRA distributions
that are used by certain unemployed, formerly unemployed, or
self employed individuals to pay health insurance premiums.
The failure to commence distribution by April 1 of the calendar
year following the calendar year in which the Participant
attains age 70 1/2 or the failure of a Participant to receive
certain minimum distributions in years following the calendar
year in which the Participant attains age 70 1/2 will result
in a stiff excise tax on the IRA owner.
A 15% excise tax is generally imposed to the extent that
annual benefit payments from an individual's IRA and any
retirement plans exceed $150,000. However, this tax will not
apply to certain excess benefits accrued before August 1, 1986.
The 15% excise tax has been suspended on distributions made
during 1997, 1998, and 1999. Additionally, distributions made
during those years are treated as made first from non-
grandfathered amounts accrued before August 1, 1986.
In addition, if a Participant engages in any transaction
with his or her Canandaigua National IRA which is prohibited
under the Code, such Participant's IRA may lose its status as
an IRA and the assets held in the Canandaigua National IRA will
be deemed under the Code to have been distributed to the
Participant and be includible in gross income. If any
Participant should pledge all or any portion of his or her
Canandaigua National IRA as security for a loan, the portion
pledged is deemed under the Code to have been distributed to
the Participant and is includible in gross income.
TRANSFER AND ROLLOVER CONTRIBUTIONS. An individual can
make a tax-free transfer into an IRA of all or a portion of the
individual's interest in another individual retirement account
or individual retirement annuity. An individual can also make
a tax-free rollover contribution of all or a portion of a
distribution from another individual retirement account or
individual retirement annuity. However, once a rollover
contribution has been made to an IRA, a rollover contribution
may not be made with respect to a subsequent distribution from
that IRA for a period of 12 months.
An individual may also make a rollover contribution into
an IRA of all or a portion of a lump sum distribution or of
certain partial distributions (other than a distribution of
nondeductible employee contributions) from a qualified
retirement plan. However, once an election has been made to
rollover a lump sum distribution from a qualified retirement
plan, the amount rolled over is no longer eligible for any
special tax treatment generally associated with lump sum
distributions from qualified retirement plans.
The Canandaigua National IRA will accept a transfer or
rollover contribution from an individual retirement account or
annuity that consists of amounts which were deductible as
contributions to the retirement account or annuity (and any
earnings thereon). The Canandaigua National IRA will also
accept a rollover contribution of all or a portion of a lump
sum distribution or of certain partial distributions (other
than a distribution of nondeductible employee contributions)
from a qualified retirement plan. A rollover contribution must
be received by the Canandaigua National IRA within 60 days of
the date of receipt of the distribution from the other
individual retirement account or annuity or from the qualified
retirement plan.
SIMPLIFIED EMPLOYEE PENSION PROGRAMS. If an employer has
established a simplified employee pension program (SEP), the
employer can make contributions to the IRA for each eligible
employee under the SEP.
Under a SEP an employer can contribute to an employee's
IRA for the employee's tax year an amount equal to 15% of the
employee's compensation (determined without taking into account
the employer's contribution to the SEP) up to a maximum of
$30,000. Whether or not the employer contributes the maximum,
the employee may contribute up to the standard maximum
individual IRA contribution limit (to the extent that the
employee did not use up the limit for contributions to IRAs
outside the employer's SEP program). However, the employee's
deduction may be reduced or eliminated based upon the limits
described above because as a Participant in a SEP, the employee
is considered to be covered by an employer retirement plan. If
the employer's SEP program takes into consideration more than
$100,000 of a person's compensation (but never more than
$200,000), adjusted for inflation, then the employer must
contribute on behalf of each person covered under the SEP at a
rate of at least equal to 7.5% of compensation from that
employer.
If established before January 1, 1997, a SEP may permit an
employee to elect to have contributions made to the SEP on the
employee's behalf or to receive the contributions in cash. The
election will be available only if the employer has 25 or fewer
eligible employees at any time during the preceding taxable
year. All employees of the employer must be eligible to make
such an election and at least 50 percent of the eligible
employees must elect to have amounts contributed to the SEP.
The election can apply to only $7,000 (adjusted for inflation)
of the contributions which would otherwise be made to the SEP
on the employee's behalf.
An employer can contribute and an employee can take a
deduction for the employer's contribution made on his behalf
under the SEP even if the employee is over age 70 1/2 when the
contribution is made.
SIMPLE PLANS. Beginning January 1, 1997, small businesses
that normally employ 100 or fewer employees, paid them at least
$5,000.00 in compensation in the preceding year, and do not
maintain another qualified plan may establish a savings
incentive matching plan for their employees ("SIMPLE Plan").
A SIMPLE Plan can be in the form of either an IRA for each
employee or part of a qualified 401(k) plan. Employees may
make elective contributions of up to $6,000.00 per year to a
SIMPLE Plan, and employers must make matching contributions.
Contributions to a SIMPLE IRA account are limited to
employee contributions and required employer matching
contributions or non-elective contributions. Under the SIMPLE
Plan, an employee may make elective contributions (expressed as
a percentage of compensation) up to $6,000.00 per year (indexed
for inflation). An employer's contribution must satisfy one of
two formulas. Under the matching contribution formula,
employers are generally required to match employee
contributions on a dollar for dollar basis, up to 3% of an
employee's compensation. However, an employer also may elect
to match contributions for all eligible employees at a rate
lower than 3% (but not lower than 1%) in any two years in a
five year period. Under the alternative formula, an employer
may elect to make non-elective contributions of 2% of
compensation for each eligible employee who has earned at least
$5,000.00 in compensation during the year.
Distributions from a SIMPLE account generally are taxed
like distributions from an IRA. In addition, the participant
may roll over a distribution from a SIMPLE account to an IRA
without penalty if the individual has participated in the
SIMPLE plan for two years.
Participants who take withdrawals from a SIMPLE account
before age 59 1/2 are generally subject to the 10% early
withdrawal penalty applicable to IRAs. Additionally employees
who withdraw contributions during the two year period beginning
on the date they first began participating in the SIMPLE Plan
will be assessed a 25% penalty tax.
RETIREMENT PLANS (INCLUDING THOSE FOR SELF-EMPLOYED
INDIVIDUALS)
Corporations, self-employed persons and partners of
partnerships can establish retirement plans (a "Plan") which,
in order to receive favorable treatment under the Code, must be
maintained in conformity with Section 401(a) of the Code. A
Qualified Trust forms part of the Plan.
CONTRIBUTIONS. A Plan may provide for annual employer tax
deductible contributions up to the maximum allowed in each tax
year. Corporations can deduct contributions to a profit
sharing Plan up to 15% of aggregate compensation or 25% in the
case of a money purchase Plan or to both a money purchase Plan
and a profit sharing Plan. For all self-employed individuals,
the maximum tax deductible contribution to a profit sharing
Plan is 15% of "earned income" as defined in the Code, from the
trade or business for which the Plan is established, up to a
maximum of $30,000. The maximum tax deductible contribution to
a money purchase pension Plan, or to both a profit sharing
Plan, and a money purchase pension Plan, is 25% of "earned
income" up to a maximum of $30,000. Generally the amount of
"earned income" which may be taken into account in determining
the maximum tax deductible contributions is limited to $200,000
and is determined net of the Plan contributions.
Additional special limits on contributions apply to any
self-employed individual who participates in more than one
self-employed retirement plan or who controls another trade or
business. And there is an overall limit on the total amount of
contributions and benefits under all tax deferred plans in
which a person participates.
DISTRIBUTIONS. Income or gains on contributions to a Plan
are not subject to federal income tax until a Participant
receives a distribution of benefits from the Plan. Benefits
must commence by the first day of April of the calendar year
following the later of either the calendar year in which the
Participant (i) attains age 70 1/2 or (ii) retires. Five
percent owners of the employer, as defined by the Code, must
begin receiving distributions no later than April 1st of the
calendar year following that in which they become 70 1/2 .
A penalty tax will be imposed on the Plan if a Participant
fails to receive certain minimum distributions in years
following the calendar year in which the Participant attains
age 70 1/2 . Further, a 15% excise tax will generally be
imposed to the extent that annual benefit payments from a Plan
and the individual's IRA exceed $150,000. However, this excise
tax will not apply to certain excess benefits accrued before
August 1, 1986. This excise tax has been suspended on
distributions made during 1997, 1998, and 1999. Additionally,
distributions made during those years are treated as made first
from non-grandfathered amounts accrued before August 1, 1986.
A taxpayer will be permitted a one-time election of five-
year income tax averaging for a lump sum distribution received
after he or she attains age 59 1/2 . Further, a Participant
who had attained age 50 by January 1, 1986 will be permitted to
make one election of five-year income tax averaging (with the
five-year averaging being computed at the income tax rates in
effect at the date of the distribution) or ten-year income tax
averaging (with the ten-year income tax averaging being
computed at the income tax rates in effect prior to the Tax
Reform Act) with respect to a lump sum distribution even though
the Participant has not attained age 59 1/2 . Such a
Participant may also retain the capital gain character of the
pre-1974 portion of the distribution with such capital gain
portion being taxed at a rate of 20%. The Small Business Job
Protection Act of 1996 repealed five-year averaging for lump
sum distributions for tax years beginning after 1999.
All or any portion of a lump sum distribution which
qualifies for the special lump sum distribution tax treatment
discussed above (except the requirement that the Participant
have participated in the Plan for at least five tax years) and
all or any portion of certain partial distributions will also
qualify for a tax-deferred rollover into an individual
retirement account or annuity if the Participant completes the
rollover within 60 days of the date he or she receives the lump
sum or partial distribution. In addition, any distribution of
a Participant's entire interest in the Plan on account of the
termination of the Plan may also be rolled over on a tax-
deferred basis to an individual retirement account or annuity.
If a Participant receives an amount from the Plan before
he or she attains age 59 1/2 , the amount received will be
subject to an early withdrawal penalty tax of 10% of such
amount unless the Participant is disabled, the amount is
distributed to a beneficiary on or after the Participant's
death, the amount is rolled over into an individual retirement
account or annuity, or the withdrawal is made after the
Participant has attained age 55, has separated from service and
has satisfied the conditions for early retirement under the
Plan. The penalty tax will also not apply if the withdrawal is
in the form of an annuity payable over the life or life
expectancy of the Participant (or over the lives or joint life
and last survivor expectancy of the Participant and the
Participant's beneficiary), is used for the payment of medical
expenses to the extent deductible under Section 213 of the Code
or is paid pursuant to a qualified domestic relations order.
THE COLLECTIVE TRUST
The Collective Trust has received the opinion of Underberg
& Kessler LLP, its legal counsel, that it is a commingled trust
which is exempt from taxation (i) under Section 408(e) of the
Code with respect to funds derived from Participating Trusts
which are IRAs maintained in conformity with Section 408(a) of
the Code and (ii) under Section 501(a) of the Code with respect
to funds derived from Participating Trusts which are pension
and profit-sharing trusts maintained in conformity with Section
401(a) of the Code. In order for the Portfolio to maintain its
tax exempt status, only Qualified Trusts may participate in the
Collective Trust. In addition, all investments and income
belonging to any Qualified Trust must be used exclusively for
the benefit of the Participants under that Qualified Trust; no
Participating Trust may assign any part of its interest in the
Collective Trust; the Collective Trust must at all times be
maintained as a domestic trust in the United States; and there
must be a separate accounting for the interest of each
Participating Trust in the Collective Trust.
Excess contributions by a Participant to a Qualified Trust
which are then invested in the Collective Trust and the timing
of withdrawals from the Collective Trust by a Participating
Trust do not affect the exemption of the Collective Trust's
income from federal income tax. In addition, timing of
withdrawals from the Collective Trust alone will not affect a
Participant's tax exemption for retirement funds invested in
the Collective Trust. Retirement funds invested in the
Collective Trust and the income of the Collective Trust are
subject to federal income tax when a Participant receives, or
is deemed under a federal tax law to have received, a
distribution from a Participating Trust.
The Collective Trust does not intend to declare or pay
dividends from its net investment income or to make
distributions of any gains realized from sales of portfolio
securities. Income on portfolio securities of each Investment
Portfolio will be added to the total asset value of the assets
of such Investment Portfolio.
The foregoing describes only certain federal tax
considerations. It does not describe other tax laws such as
state or local taxes, and does not describe fully taxation of
distributions from a Qualified Trust. Participants who
maintain a Canandaigua National IRA should read carefully the
Canandaigua National IRA Fact Book or other disclosure
statement for more complete information and should consult
their individual tax advisers. However, the tax consequences
of participation in the Collective Trust will also depend, in
part, upon the facts and circumstances of the individual
Participant or Qualified Trust, and each Participant in the
Qualified Trust.
PORTFOLIO TRANSACTIONS
In placing orders with brokers or dealers the Trustee will
have the objective of obtaining a combination of the most
favorable commission and the best price obtainable on each
transaction, taking into consideration the quality of
execution. The Trustee will also consider in the allocation of
investment transactions the research and investment information
provided by brokers and dealers. These research and investment
information services make available to the Trustee, for its
analysis and consideration as investment manager to the
Collective Trust, and its other accounts, the views and
information of individuals and research staffs of many
securities firms. Such research and investment information may
include advice concerning the value of securities; the
advisability of investing in, purchasing or selling securities;
the availability of securities or the purchasers or sellers of
securities; analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio
strategy and performance of accounts. The information may
benefit or relate to other accounts to which the Trustee
provides investment advice. The Trustee may occasionally
engage in soft dollar trades under its arrangements with
Northern Trust Company, which is sub-custodian for the
Collective Trust. Such trades have been infrequent and
insubstantial and are expected to be so in the future.
Collective Trust securities may not be purchased from or
sold to the Trustee or any affiliated person (as defined in the
Investment Company Act) of the Trustee except as may be
permitted by the SEC and subject to the rules and regulations
of the Comptroller of the Currency. Affiliated persons of the
Collective Trust include Canandaigua National, CNC and each of
their subsidiaries, their officers and directors. See
"Administration of the Collective Trust." These limitations,
in the opinion of the Supervisory Committee, will not
significantly affect the Collective Trust's ability to pursue
its present objectives. However, in the future in other
circumstances, the Collective Trust may be at a disadvantage
because of this limitation in comparison to other funds with
similar investment objectives but not subject to such
limitations.
Certain investments may be appropriate for the Collective
Trust and also for other clients advised by the Trustee.
Investment decisions for the Collective Trust and other clients
are made with a view to achieving their respective investment
objectives and after consideration of such factors as their
current holdings, availability of cash for investment and the
size of their investments generally. Frequently, a particular
security may be bought or sold for one or more clients in
different amounts. In such event, and to the extent permitted
by applicable law and regulations, such transactions will be
allocated among the clients in a manner believed to be
equitable to each. Ordinarily, such allocation will be made on
the basis of the weighted average price of such transactions
effected during a trading day, and if all orders for the same
security could be only partially executed during a trading day,
then securities will be allocated proportionally on the basis
of the sizes of the orders. In some cases, this procedure
could have an adverse effect on the price and amount of the
securities purchased or sold by the Collective Trust.
GENERAL INFORMATION
TERMINATION OF THE COLLECTIVE TRUST
The Collective Trust has been established to continue for
such time as may be necessary to accomplish the purposes for
which it was created. Subject to approval of the Participating
Trusts which own at least a majority of the outstanding units
of any Retirement Portfolio, the Trustee may (1) sell the
assets of such Retirement Portfolio to another Retirement
Portfolio or to another trust or corporation in exchange for
cash or securities of such trust or corporation, and distribute
such cash or securities, ratably among the Participating Trusts
which own the units of such Retirement Portfolio; and (2) sell
and convert into money the assets of such Retirement Portfolio
and distribute the proceeds or such assets ratably among the
Participating Trusts which own the units of such Retirement
Portfolio. In addition, the Trustee may sell and convert into
money the assets of any Retirement Portfolio upon 60 days'
notice to the Participating Trusts owning units of such
Retirement Portfolio in the event the net asset value of the
units of such Retirement Portfolio is less than $5,000,000. In
such an event, the proceeds would be distributed ratably among
the Participating Trusts which own the Units of such Retirement
Portfolio.
Upon completion of the distribution of the remaining
proceeds or the remaining assets of any Retirement Portfolio,
the Collective Trust will terminate as to that Retirement
Portfolio and the Trustee will be discharged of any and all
further liabilities and duties and the right, title and
interest of all parties will be cancelled and discharged,
except that the Trustee will not be discharged with respect to
any liability arising from willful misfeasance, bad faith,
gross negligence or reckless disregard.
CUSTODIAN AND UNITHOLDER ACCOUNT SERVICER
Northern Trust Company, Chicago, Illinois, acts as
custodian of the assets of the Collective Trust. Canandaigua
National acts as Unitholder Account Servicer. Canandaigua
National is not paid any fee for these services but is
reimbursed for the expenses which it incurs to perform them.
PRINCIPAL HOLDERS OF UNITS
As of February 10, 1997, no person beneficially owned 5%
or more of the outstanding units of either Portfolio of the
Collective Trust, except Willard B. Becker, 3299 West Lake
Road, Canandaigua, New York, who owned 2,949.1079 units of the
Bond Portfolio constituting 7.4% of that Portfolio, Paul H.
Simmons, 5116 North Road, Canandaigua, New York, who owned
2,514.6689 units of the Bond Portfolio constituting 6.4% of
that Portfolio, and Allied Builders Inc. Prevailing Wage Rate
Retirement Plan, 250 State Street, Brockport, New York, which
owned 4,959.614 units of the Bond Portfolio constituting 12.5%
of that Portfolio.
Canandaigua National, as trustee or various IRA accounts
and other Qualified Trusts, is the record owner of 100% of the
outstanding units of the Collective Trust. The officers and
members of the Supervisory Committee of the Collective Trust,
as a group, beneficially own no units of the Collective Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Underberg & Kessler LLP, as counsel for the Collective
Trust, has rendered its opinion as to certain legal matters
regarding the due authorization and valid issuance of the units
of beneficial interest in the Collective Trust. Morga Jones &
Hufsmith, P.C., independent accountants, have been selected to
examine the annual financial statements of the Collective Trust
and render a report thereon.
<PAGE>
MJH Morga Jones & Hufsmith, P.C.
Certified Public Accountants
________________________________________________________________________________
25 North Street . Canandaigua, NY 14424 . (716)
398-2880 FAX 394-7513
3300 Monroe Avenue, Suite 309, Rochester, NY 14618
(716) 586-2900 FAX 586-5840
INDEPENDENT AUDITORS' REPORT
To: Board of Directors Canandaigua National Collective Investment Fund for
Qualified Trusts
We have audited the accompanying statement of assets and liabilities of
Canandaigua National Collective Investment Fund for Qualified Trusts including
the schedule of portfolio investments, as of December 31, 1996, and the related
statement of operations for the year then ended, the statement of changes in
net assets for the years ended December 31, 1996 and 1995 and the selected per-
share data and ratios for the years ended December 31, 1996, 1995, 1994, 1993,
and for the period from inception (September 9, 1992) through December 31,
1992. These financial statements and per-share data and ratios are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and per-share data and ratios based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per-share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of Canandaigua National Collective Investment Fund for Qualified
Trusts as of December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for the years ended December 1996 and
1995, and the selected per-share data and ratios for the years ended December
31, 1996, 1995, 1994, 1993, and for the period of inception (September 9, 1992)
through December 31, 1992, in conformity with generally accepted accounting
principles.
Canandaigua, New York
January 24, 1997
Member: American Institute of Certified Public Accountants Private Companies
Practice Section New York State Society of Certified Public Accountants
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
CANANDAIGUA NATIONAL COLLECTIVE
INVESTMENT FUND FOR QUALIFIED TRUSTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
PORTFOLIO
<TABLE>
<CAPTION>
BOND EQUITY TOTAL
ASSETS
<S> <C> <C> <C>
INVESTMENT SECURITIES, AT MARKET
(bond portfolio cost - $483,520;
equity portfolio cost - $11,639,993) $ 476,845 $ 12,419,478 $ 12,896,323
CASH AND CASH EQUIVALENT 16,393 45,652 62,045
RECEIVABLES FOR:
Sale of investments - 815,243 815,243
Dividends and accrued interest 8,658 16,575 25,233
Total assets 501,896 13,296,948 13,798,844
LIABILITIES
PAYABLES FOR:
Purchases of investments - (638,982) (638,982)
Investment management fees (213) (10,799) (11,012)
Professional fees (170) (3,031) (3,201)
Custodial fees (246) (329) (575)
Total liabilities (629) (653,141) (653,770)
NET ASSETS AT DECEMBER 31, 1996:
(equivalent to $12.54 per unit for
bond portfolio and $16.67 per unit
for equity portfolio, based on 39,981
units and 758,660 units outstanding for
bond and equity portfolios, respectively) $501,267 $12,643,807 $13,145,074
</TABLE>
The accompanying notes are an integral part of these financial statements.
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
CANANDAIGUA NATIONAL COLLECTIVE
INVESTMENT FUND FOR QUALIFIED TRUSTS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PORTFOLIO
BOND EQUITY TOTAL
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 29,045 $ 3,751 $ 32,796
Dividend income 1,330 119,413 120,743
Total investment income 30,375 123,164 153,539
EXPENSES:
Investment management fees (2,442) (108,183) (110,625)
Custodial fees (2,400) (2,921) (5,321)
Professional fees (432) (8 573) (9 005)
Total expenses (5,274) (119,677) (124,951)
Net investment income 25,101 3,487 28,588
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) (789) 1,418,848 1,418,059
Net unrealized gain (loss) (11,226) 608,639 597,413
Net realized and unrealized gain (loss)
on investments (12,015) 2,027,487 2,015,472
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 13,086 $ 2,030,974 $ 2,044,060
</TABLE>
The accompanying notes are an integral part of these financial statements.
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
CANANDAIGUA NATIONAL COLLECTIVE
INVESTMENT FUND FOR QUALIFIED TRUSTS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
PORTFOLIO
BOND EQUITY TOTAL
FOR THE YEAR ENDED DECEMBER 31, 1996 -
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 25,101 $ 3,487 $ 28,588
Net realized gain (loss) on investments (789) 1,418,848 1,418,059
Net unrealized gain (loss) on investments (11,226) 608,639 597,413
Net increase in net assets resulting
from operations 13,086 2,030,974 2,044,060
UNIT SHARE TRANSACTIONS:
Proceeds from units sold
(12,951 and 178,976 units in the bond
and equity funds, respectively) 156,277 2,729,159 2,885,436
Cost of units purchased (6,310 and
35,580 units in the bond and
equity funds, respectively) (76 541) (548,895) (625,436)
Net increase in net assets resulting
from unit transactions 79,736 2,180,264 2,260,000
TOTAL INCREASE IN NET ASSETS 92,822 4,211,238 4,304,060
NET ASSETS - beginning of year 408,445 8,432,569 8,841,014
NET ASSETS - end of year $ 501,267 $12,643,807 $ 13,145,074
FOR THE YEAR ENDED DECEMBER 31, 1995 -
OPERATIONS:
Net investment income $ 23,752 $ 23,121 $ 46,873
Net realized gain (loss) on investments (665) 1,254,685 1,254,020
Net unrealized gain on investments 42,615 269,048 311,663
Net increase in net assets resulting
from operations 65,702 1,546,854 1,612,556
UNIT SHARE TRANSACTIONS:
Proceeds from units sold
(7,521 and 130,447 units in the bond
and equity funds, respectively) 91,141 1,664,731 1,755,872
Cost of units purchased
(3,969 and 45,578 units in the bond and
equity funds, respectively) (46,524) (555,722) (602,246)
Net increase in net assets resulting
from unit transactions 44,617 1,109,009 1,153,626
TOTAL INCREASE IN NET ASSETS 110,319 2,655,863 2,766,182
NET ASSETS - beginning of period 298,126 5,776,706 6,074,832
NET ASSETS - end of period $ 408,445 $ 8,432,569 $ 8,841,014
</TABLE>
The accompanying notes are an integral part of these financial statements.
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
CANANDAIGUA NATIONAL COLLECTIVE
INVESTMENT FUND FOR QUALIFIED TRUSTS
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
BOND PORTFOLIO
<TABLE>
<CAPTION>
COST MARKET VALUE
PERCENTAGE
AMOUNT OF NET ASSETS
<S> <C> <C> <C>
INVESTMENT SECURITIES:
U.S. GOVERNMENT NOTES & BONDS -
2O,000 US Treasury Note, 7.000%, July l5, 2006 $ 19,977 $ 20,781 4.15%
10,000 US Treasury Bond, 5.875%, November l5, 2005 9,981 9,647 1.92%
15,000 US Treasury Note, 5.750%, September 30, 1997 14,969 14,991 2.99%
10,000 US Treasury Note, 6.125%, May 15, 1998 9,989 10,022 2.00%
15,000 US Treasury Note, 6.250%, August 31, 2000 14,924 15,056 3.00%
25,000 US Treasury Note, 6.125%, September 30, 2000 24,983 24,984 4.98%
10,000 US Treasury Note, 5.500%, December 31, 2000 19,822 19,538 3.90%
15,000 US Treasury Note, 5.250%, January 31, 2001 14,928 14,544 2.90%
25,000 US Treasury Note, 5.625%, February l5, 2006 24,955 23,664 4.72%
25,000 US Treasury Note, 6.125%, March 31, 1998 24,991 25,055 5.00%
20,000 US Treasury Note, 6.375%, March 31, 2001 19,966 20,131 4.02%
25,000 US Treasury Note, 6.875%, May l5, 2006 24,939 25,773 5.14%
10,000 US Treasury Note, 5.250%, January 31, 2001 9,759 9,691 1.93%
Total U.S. Government Notes & Bonds 234,183 233,877 46.66%
CORPORATE BONDS
CAPITAL EQUIPMENT
AEROSPACE & MILITARY TECHNOLOGY
15,000 Lockheed Martin Corporation,
6.750%, March 15, 2003 15,900 14,949 2.98%
Total Capital Equipment 15,900 14,949 2.98%
CONSUMER GOODS
BEVERAGE & TOBACCO
20,000 Coca-Cola Company, 6.000%, July 15, 2003 19,962 19,434 3.88%
20,000 R.J.R Nabisco Holdings Corp.,
6.700%, June 15, 2002 19,505 19,718 3.93%
RETAIL TRADING
25,000 Sears Roebuck & Company, 6.250%,
January 15, 2004 23,680 24,121 4.81%
SPECIALTY CHEMICALS
25,000 Eastman Chemical Company, 6.375%,
January 15, 2004 25,141 24,306 4.85%
Total Consumer Goods 88,288 87,579 17.47%
</TABLE>
The accompanying notes are an integral part
of these financial statements.
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
CANANDAIGUA NATIONAL COLLECTIVE
INVESTMENT FUND FOR QUALIFIED TRUSTS
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
BOND PORTFOLIO (CONTINUED) COST MARKET VALUE
PERCENTAGE
AMOUNT OF NET ASSETS
CORPORATE BONDS (CONTINUED)
<S> <C> <C> <C>
FINANCE
BANKING
30,000 Citicorp, 6 750%, August 15, 2005 30,854 29,441 5.87%
FINANCIAL SERVICES
10,000 Ford Motor Credit Co., 6.850%,
August 15, 2000 10,004 10,106 2.02%
20,000 General Electric Capital Corp.
5.500%, November 01, 2001 19,940 19,114 3.81%
30,000 Merrill Lynch & Company, Inc.
6.250%, October 15, 2008 29,681 27,898 5.57%
20,000 Salomon Inc., 6.750%,
August 15, 2003 19,905 19,453 3.88%
Total Finance 110,384 106,012 21.15%
SERVICES
TELECOMMUNICATIONS
20,000 Pacific Bell, 6.250%,
March 01, 2005 19,600 19,203 3.83%
Total Services 19,600 19,203 3.83%
Total Corporate Bonds 234,172 227,743 45.43%
PREFERRED STOCK
FINANCE
FINANCIAL SERVICES
600 The Bear Stearns Companies, Inc.,
Class B 15,165 15,225 3.04%
Total Preferred Stock 15,165 15,225 3.04%
TOTAL INVESTMENT SECURITIES 483,520 476,845 95.13%
CASH AND CASH EQUIVALENT:
Canandaigua National Bank Collective
Fixed Income 16,393 16,393 3.27%
EXCESS OF RECEIVABLES OVER PAYABLES 8,029 8,029 1.60%
NET ASSETS $507,942 $ 501,267 100.00%
</TABLE>
The accompanying notes are an integral part of these financial statements.
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
CANANDAIGUA NATIONAL COLLECTIVE
INVESTMENT FUND FOR QUALIFIED TRUSTS
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
COST MARKET VALUE
PERCENTAGE
AMOUNT OF NET ASSETS
<S> <C> <C> <C>
INVESTMENT SECURITIES:
COMMON STOCK -
CAPITAL EQUIPMENT
AEROSPACE & MILITARY TECHNOLOGY
4,000 Lockheed Martin Corporation $ 354,151 $ 366,000 2.89%
ELECTRICAL & ELECTRONICS
3,500 General Electric Co 338,616 346,063 2.74%
FARM MACHINERY
22,000 AGCO Corporation 531,811 629,750 4.98%
15,000 Deere & Company 675,086 609,375 4.82%
SEMICONDUCTORS
4,500 Intel Corporation 585,206 589,219 4.66%
8,500 Vitesse Semiconductor Corporation 309,514 386,750 3.06%*
INDUSTRIAL TECHNOLOGY
11,000 U.S. Robotics Corp. 511,068 792,000 6.26%*
Total Capital Equipment 3,305,452 3,719,157 29.41 %
CONSUMER GOODS
BEVERAGE & TOBACCO
6,500 Anheuser Busch Companies, Inc. 265,664 260,000 2.06%
PHARMACEUTICAL
3,500 American Home Products Corp. 207,367 205,188 1.62%
2,500 Bristol-Myers Squibb Co. 269,684 271,875 2.15%
4,500 Merck & Co., Inc. 275,055 356,625 2.82%
4,000 Schering-Plough Corp. 261,989 259,000 2.05%
5,000 Smithkline Beecham, p.l.c. 321,234 340,000 2.69%
4,000 Warner-Lambert Co. 315,489 300,000 2.37%
Total Consumer Goods 1,916,482 1,992,688 15.76%
SOFTWARE
SOFTWARE
12,500 ORACLE Corporation 503,697 521,875 4.13%*
20,000 Platinum Technology, Inc. 265,009 272,500 2.16%*
6,000 CISCO Systems, Inc. 349,777 381,750 3.02%*
Total Software 1,118,483 1,176,125 9.30%
FINANCE
BANKING
2,300 Wells Fargo & Co. 638,982 620,425 4.91%
FINANCIAL SERVICES
9,000 American Guaranty Corporation 207,009 231,750 1.83%*
15,000 First USA, Inc. 435,581 519,375 4.11%
12,000 MBNA Corporation 358,460 498,000 3.94%
Total Finance 1,640,032 1,869,550 14.79%
SERVICES
ENTERTAINMENT
4,000 Walt Disney Co. 252,610 278,500 2.20%
BUSINESS & PUBLIC SERVICES
11,450 Paychex, Inc. 501,117 588,958 4.66%
10,000 First Data Corporation 373,709 365,000 2.89%
TELECOMMUNICATIONS
19,000 Frontier Corporation 426,675 429,875 3.40%
29,000 LCI International, Inc. 807,602 623,500 4.93%*
24,000 World Communications, Inc. 511,482 625,500 4.95%*
TRANSPORTATION
20,000 Southwest Airlines Company 485,436 442,500 3.50%
Total Services 3,358,631 3,353,833 26.53%
SPECIALTY CHEMICAL
SPECIALTY CHEMICAL
2,500 Morton International, Inc. 102,184 101,875 0.81%
Total Specialty Chemical 102,184 101,875 0.81%
MULTI-INDUSTRY
MULTI-INDUSTRY
6,000 US Industries Group, Inc. 198,729 206,250 1.63%
Total Multi-Industry 198,729 206,250 1.63%
TOTAL INVESTMENT SECURITIES (COMMON STOCK) 11,639,993 12,419,478 98.23%
CASH AND CASH EQUIVALENT:
Canandaigua National Bank
Collective Equity Fund 45,652 45,652 0.36%
EXCESS OF RECEIVABLES OVER PAYABLES 178,677 178,677 1.41%
NET ASSETS $11,864,322 $12,643,807 100.00%
</TABLE>
__________________________
*Non-income producing securities
The accompanying notes are an integral part of these financial statements.
CANANDAIGUA NATIONAL COLLECTIVE
INVESTMENT FUND FOR QUALIFIED TRUSTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION
Canandaigua National Collective Investment Fund for Qualified Trusts (the
Collective Trust) is registered under the Investment Company Act of 1940 as an
open-end, diversified management investment company. The Collective Trust is
designed for the investment of retirement funds held in certain qualified
trusts. The Collective Trust was formed in September, 1992.
The Canandaigua National Bank and Trust Company (the Company) is the trustee of
the Collective Trust (see Note 3).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES -
The financial statements have been prepared in conformity with generally
accepted accounting principles and as such include amounts based on informed
estimates and judgments of management with consideration given to materiality.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS -
Interest bearing cash accounts are considered cash equivalents.
VALUATION OF INVESTMENT SECURITIES AND INCOME RECOGNITION -
Investments consist of debt and equity investment securities of the United
States (U.S.) government and of corporations whose securities are traded on
recognized U.S. securities exchanges. Investment securities are stated at
market value based upon closing sales prices reported on recognized securities
exchanges on the last business day of the year or, for listed securities having
no sales reported and for unlisted securities, upon last reported bid prices on
that date. The market value of investment securities is subject to daily
fluctuations. Short-term securities with 60 days or less to maturity are
amortized to maturity based on their cost to the Collective Trust if acquired
within 60 days of maturity or, if already held by the Collective Trust on the
60th day, based on the value determined on the 61st day. Securities for which
quotations are not readily available are valued at fair value as determined in
good faith by the Supervisory Committee of the Collective Trust.
The fair value of receivables for sale of investments and payables for purchase
of investments are based on fair values as of the date of sale or purchase of
the investment security.
The estimated fair value of individual investment securities held at December
31, 1996 are disclosed in the accompanying Schedule of Portfolio Investments.
As is customary in the industry, securities transactions are accounted for on
the date the securities are purchased or sold. Interest income is reported on
the accrual basis. Dividend income is recorded on the ex-dividend date.
INCOME TAXES
It is the policy of the Collective Trust to comply with applicable requirements
of the Internal Revenue Code. The Collective Trust is exempt from Federal
income tax under Section 408 (e) of the Internal Revenue Code with respect to
interests in the Collective Trust which are attributable to individual
retirement trust accounts maintained in conformity with Section 408 (e) of the
Internal Revenue Code, and exempt from Federal income tax under Section 501 (a)
of the Internal Revenue Code with respect to interests in the Collective Trust
which are attributable to pension or profit-sharing trusts (including those
benefiting self-employed individuals) maintained in conformity with Section 401
(a) of the Internal Revenue Code. The Collective Trust is also not subject to
taxation in New York State. For Federal income tax purposes, income earned by
the Collective Trust is not taxable to participating trusts or participants
until a participant receives a distribution from the Collective Trust.
Withdrawals from the Collective Trust which are paid to participating trusts
can be made at any time by participating trusts without penalty and without the
amount withdrawn being subject to Federal income tax.
VALUATION OF SHARE UNITS -
The Declaration of Trust provides that the Collective Trust may issue an
unlimited number of units of beneficial interest without par value. Currently,
the Collective Trust is offering units in a bond and a stock portfolio. The
unit shares are voting, non-assessable, and have no preemptive rights or
preferences as to conversion, exchange, dividends or retirement. At December
31, 1996, the majority of unit holders are located in New York State. The net
asset value per unit of each portfolio is determined by dividing the total
value of the portfolio's net assets by the number of outstanding units of the
portfolio. The net assets value per unit in the accompanying financial
statements is calculated in consideration of all purchases and sales transacted
during the year.
(3) AGREEMENTS
The Company is the trustee of the Collective Trust under a Declaration of Trust
dated September 9, 1992 Subject to the direction of the Supervisory Committee
of the Collective Trust, which performs the duties and undertakes the
responsibilities of the Board of Directors of an investment company, the
Company manages all of the business and affairs of the Collective Trust.
The Collective Trust has entered into an Investment Management Agreement with
the Company dated October 6, 1992. Under the terms of the agreement, the
Company will manage the investment of the assets of each retirement portfolio
in conformity with the stated objectives and policies of that portfolio. For
these services, the Collective Trust will pay investment management fees to the
Company, at the rate of 1% of assets annually. During 1994 the Supervisory
Committee authorized a reduction of this fee for the bond portfolio to .5%.
In addition, the Company is responsible for certain other expenses incurred in
the administration of the Collective Trust. The Company will reimburse the
Collective Trust for the amount by which the expenses exceed the lower of (1)
1.5% of the average daily value of the Collective Trust's net assets during its
fiscal year or (2) the most restrictive expense limitation applicable to the
Collective Trust imposed by the securities laws of any state in which the units
of the Collective Trust are sold.
The Northern Trust Company acts as custodian of the assets of the Collective
Trust. Custodial fees paid by the Collective Trust are based on an agreed fee
schedule for asset holdings and transactions.
The Collective Trust has entered into an accounting service agreement with
American Data Services, Inc., for a three year period beginning January 1,
1996. Fees are based on monthly average net assets per portfolio. The agreement
calls for an annual increase in fees based on a defined increase in the
Consumer Price Index for the Northeast region. These fees are paid by the
Company as part of its responsibility in the administration of the Collective
Trust.
(4) OTHER DISCLOSURES
Investment Securities Purchases and Sales -
During the year ended December 31, 1996, purchases and sales of investment
securities, excluding cash and cash equivalent, amounted to the following:
PORTFOLIO
Bond Equity
Purchases $ 248,636 $ 38,231,652
Sales $ 147,827 $ 36,180,749
The following is a summary of investment security activity since June 30, 1996:
PORTFOLIO
Bond Equity
Purchases $ 69,511 $ 22,614,191
Sales -
Cost $109,091 $ 20,830,965
Gain (1oss) (1,077) 1,011,762
Total $ 108,014 $ 21,842,727
UNREALIZED GAINS (LOSSES) ON INVESTMENTS -
Gross unrealized gains (losses) on investments as of December 31, 1996 are as
follows:
PORTFOLIO
Bond Equity
Gross unrealized gains $ 756 $1,126,130
Gross unrealized (losses) $(7,431) $ (346,645)
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
CANANDAIGUA NATIONAL COLLECTIVE
INVESTMENT FUND FOR QUALIFIED TRUSTS
SELECTED PER SHARE DATA AND RATIOS
PORTFOLIO
<TABLE>
<CAPTION>
Bond Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993* 1992 (a) 1996 1995 1994 1993* 1992 (a)
PER-SHARE INCOME AND
CAPITAL CHANGES
(For a share outstanding
throughout each period):
Investment income $ 0.75 $0.91 $0.70 $0.53 (b) $0.18 $0.18 $0.19 $0.30 (b)
Expenses (0.13) (0.10) (0.08) (0.11) (b) (0.17) (0.14) (0.12) (0.12) (b)
Net investment income 0.62 0.81 0.62 0.42 (b) 0.01 0.04 0.07 0.18 (b)
Net realized and
unrealized gain on investments (0.33) 1.43 (1.09) -- (b) 2.95 2.78 (0.03) 0.41 (b)
Net increase (decrease)
in net asset value 0.29 2.24 (0.47) 0.42 (b) 2.96 2.82 0.04 0.59 (b)
Net asset value:
Beginning of period 12.25 10.01 10.48 10.06 -- 13.71 10.89 10.85 10.26 --
End of period 12.54 12.25 10.01 10.48 10.06 16.67 13.71 10.89 10.85 10.26
RATIOS OF TOTAL EXPENSES TO
AVERAGE NET ASSETS 1.09% 0.89% 0.77% 1.14% (b) 1.12% 1.11% 1.09% 1.18% (b)
RATIO OF NET INVESTMENT
INCOME TO
AVERAGE NET ASSETS 5.17% 7.11% 6.16% 4.18% (b) 0.03% 0.32% 0.69% 1.70% (b)
PORTFOLIO TURNOVER 30.46% 14.13% 24.45% 62.96% (b) 337.27% 375.30% 234.81% 165.68% (b)
NUMBER OF SHARES OUTSTANDING
AT END OF PERIOD 39,981 33,340 29,788 52,972 6,008 758,660 615,264 530,395 286,395 9,086
</TABLE>
______________________________________
*Restated
(a) For the period of inception (September 9, 1992) through December 31, 1992.
(b) Insignificant.
The accompanying notes are an integral part of these financial statements.
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS:
Included in Prospectus:
None
Included in Statement of Additional Information:
Independent Auditors' Report
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Schedule of Portfolio Investments:-
Bond Portfolio
Equity Portfolio
Notes to Financial Statements
Selected Per-Share Data and Ratios
(b) EXHIBITS:
EXHIBIT
NUMBER DOCUMENT
1* Declaration of Trust Dated September 9, 1992
2* Rules and Procedures of the Supervisory Committee
3-4 None
5* Investment Management Agreement Dated October 6, 1992 between
the Registrant and The Canandaigua National Bank and Trust
Company
6-7 None
8 (See Investment Management Agreement, Exhibit No. 5)
9 None
10* Opinion of Underberg & Kessler
11.1** Consent of Morga Jones & Hufsmith, P.C.
11.2* Consent of Underberg & Kessler (Included in Exhibit No. 10)
12 None
13* Agreements with initial Participating Trusts
14.1** The Canandaigua National Bank and Trust Company's IRA Trust
Agreement Disclosure Statement
14.2 None
15 None
16 None
27** Financial Data Schedule (filed only with EDGAR submission per
Reg. S-K, rule 601(c)(1)(v)
__________________________
* Previously filed
** Filed herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
At April 1, 1997, the number of Unitholders for each Retirement
Portfolio was as follows:
Bond Portfolio: 84
Equity Portfolio: 837
ITEM 27. INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to members of the Supervisory Committee,
officers and controlling persons of the Registrant and the Trustee pursuant
to the foregoing provisions or otherwise, the Registrant has been advised
that in the opinion of the SEC 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 member of
the Supervisory Committee, officer, or controlling person of the Registrant
and the Trustee in connection with the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such member of
the Supervisory Committee, officer or controlling person or the Trustee in
connection with the shares 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 Declaration of Trust provides with regard to indemnification that:
(a) The Collective Trust shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Collective Trust) by reason of the fact that he is or was a Trustee,
employee of the Trustee performing the duties of the Trustee, member of the
Supervisory Committee or officer of the Collective Trust or is or was
serving at the request of the Collective Trust as a director or officer of
another corporation, or was an official of a partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Collective Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonable believed to be in, or not opposed to, the best interests of
the Collective Trust, and, with respect to any criminal action or
proceedings that he had reasonable cause to believe that is conduct was
unlawful.
(b) The Collective Trust shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
complete action or suit by or in the right of the Collective Trust to
procure a judgment in its favor by reason of the fact that he is or was a
Trustee, employee of the Trustee performing the duties of the Trustee,
member of the Supervisory Committee or officer of the Collective Trust or
is or was serving at the request of the Collective Trust as a director or
officer of another corporation, or as an official of a partnership, joint
venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Collective Trust except, however, that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct
in the performance of his duty to the Collective Trust unless and only to
the extent that an appropriate court shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper.
(c) To the extent that a Trustee, employee of the Trustee performing
the duties of the Trustee, member of the Supervisory Committee or officer
of the collective Trust has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsection (a) or
(b) or in defense of any claim, issue or matter therein, he shall be
indemnified, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Except as provided in subsection (c), any indemnification under
subsection (a) or (b) (unless ordered by a court) shall be made by the
Collective Trust only as permitted under any applicable provisions of Title
I of the Employee Retirement Income Security Act of 1974, as amended, and
as authorized in the specific case upon a determination that
indemnification of a Trustee, employee of the Trustee performing the duties
of the Trustee, member of the Supervisory Committee or officer is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsection (a), (b) or (h). Such determination shall be made (1)
by the Supervisory Committee by a majority vote of a quorum consisting of
members who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if such a quorum is obtainable
and such quorum so directs, by independent legal counsel in a written
opinion.
(e) Expenses (including attorneys' fees) incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Collective
Trust in advance of the final disposition of such action, suit or
proceeding as authorized by the Supervisory Committee upon receipt of an
undertaking by or on behalf of the Trustee, employee of the Trustee
performing the duties of the Trustee, member of the Supervisory Committee
or officer to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Collective Trust as authorized
in this Article; provided that such an undertaking must be secured by a
surety bond or other suitable insurance.
(f) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any rule, agreement, vote of the Participating Trusts or
disinterested members of the Supervisory Committee or otherwise, both as to
action in his official capacity and as to action in any capacity while
holding such office, and shall continue as to a person who has ceased to be
a Trustee, employee of the Trustee performing the duties of the Trustee,
member of the Supervisory Committee or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(g) The Collective Trust may purchase and maintain insurance on
behalf of any person who is or was a Trustee, employee of the Trustee
performing the duties of the Trustee, member of the Supervisory Committee
or officer of the Trust, or is or was serving at the request of the
Collective Trust as a director or officer of another corporation, or as an
official of a partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such; provided, however, that the
Collective Trust shall not purchase or maintain any such insurance in
contravention of any applicable provision of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
(h) Anything to the contrary in the foregoing subsections (a) through
(g) notwithstanding, no Trustee, employee of the Trustee performing the
duties of the Trustee, member of the Supervisory Committee or officer shall
be indemnified against any liability to the Trust or the Participating
Trusts to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, and no Trustee, member of the
Supervisory Committee or officer shall be indemnified in any other case in
which the Investment Company Act would restrict or prohibit such
indemnification.
The Declaration of Trust also provides that:
In case any Participating Trust or former Participating Trust shall be
held to be personally liable solely by reason of its being or having been a
Participating Trust and not because of its acts or omissions or for some
other reason, the Participating Trust or former Participating Collective
Trust or its successor shall be entitled out of the Trust estate to be held
harmless from and indemnified against all loss and expense arising from
such liability. The Collective Trust shall, upon request by the
Participating Trust, assume the defense of any claim made against any
Participating Trust for any act or obligation of the Collective Trust and
satisfy any judgment thereon.
With respect to members of the Supervisory Committee who are not
interested persons within the meaning of the Investment Company Act, The
Canandaigua National Bank and Trust Company has agreed to indemnify and
hold such persons harmless, in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, brought against such persons in their
capacity as members of the Supervisory Committee against expenses
(including attorneys' fees) actually and reasonably incurred by such
persons in connection with the defense of such action, suit or proceeding,
provided such persons acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the Collective
Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that their conduct was unlawful. The
Canandaigua National Bank and Trust Company has no obligation to indemnify
such persons for any judgment, fine, or amount imposed on or payable by
such persons as a result of any determination of liability in connection
with any such action, suit or proceeding or for any amount paid in
settlement thereof.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that such persons
did not act in good faith and in a manner which they reasonably believed to
be in or not opposed to the best interests of the Collective Trust, and,
with respect to any criminal act or proceeding, had reasonable cause to
believe that their conduct was unlawful.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
See "ADMINISTRATION OF THE COLLECTIVE TRUST" in the Prospectus and
"ADMINISTRATION OF THE COLLECTIVE TRUST" in the Statement of Additional
Information for a description of the investment manager.
The following are, for the investment adviser, the directors and
senior officers who are or have been, at any time during the past two
fiscal years, engaged in any other business, profession, vocation or
employment of a substantial nature for their own account or in the capacity
of director, officer, employee, partner or trustee and a description of
such business, profession, vocation or employment of a substantial nature
and, if engaged in the capacity of director, officer, employee, partner or
trustee, the name and principal business address of the company with which
the person specified is so connected and the nature of such connection:
<TABLE>
<CAPTION>
OTHER BUSINESS,
POSITION WITH PROFESSION OR
NAME ADVISOR VOCATION
<S> <C> <C>
GEORGE W. HAMLIN, IV President, Chief Executive President and
Officer, Trust Officer Director of CNC
and Director
PATRICIA A. BOLAND Director Executive Director,
Granger Homestead;
Director of CNC
DANIEL P. FULLER Director Owner, Bristol Mountain Ski
Resort
DAVID HAMLIN, JR. Director Farmer, Director of CNC
FRANK H. HAMLIN Director President, Sonnenberg Gardens,
Director of sCNC
STEPHEN D. HAMLIN Director President, Draper Development
Corp.
Director of CNC
PAUL R. KELLOGG Director Retired; Director of CNC
ELDRED M. SALE Director Retired; Director of CNC
ROBERT G. SHERIDAN Senior Vice President, Secretary and Director
Cashier and Director of CNC
CAROLINE C. SHIPLEY Director Educator and Area II Director,
New York State School Board
Association;
Director of CNC
ALAN J. STONE Director and Managing Partner,
Chairman of the Stone Properties;
Board Director of CNC
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The SEC may regard The Canandaigua National Bank and Trust
Company, 72 South Main Street, Canandaigua, New York 14424 as the
Registrant's statutory principal underwriter.
(b) Information with respect to each director and senior officer of
The Canandaigua National Bank and Trust Company is furnished in the
following table:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS WITH POSITIONS WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
<S> <C> <C>
GEORGE W. HAMLIN, IV President, Chief Executive None
CANANDAIGUA, NY Officer, Trust Officer and
Director
PATRICIA A. BOLAND Director None
CANANDAIGUA, NY
DANIEL P. FULLER Director None
Canandaigua, NY
DAVID HAMLIN, JR. Director None
Bloomfield, NY
FRANK H. HAMLIN Director None
Canandaigua, NY
STEPHEN D. HAMLIN Director None
Canandaigua, NY
PAUL R. KELLOGG Director None
Canandaigua, NY
ELDRED M. SALE Director None
Victor, NY
ROBERT G. SHERIDAN Senior Vice President, None
Canandaigua, NY Cashier and Director
CAROLINE C. SHIPLEY Director None
Canandaigua, NY
ALAN J. STONE Director and None
Honeoye, NY Chairman of the Board
JAMES C. MINGES Senior Vice President None
Canandaigua, NY
GREGORY S. MACKAY Senior Vice President Treasurer and Member
Canandaigua, NY of the
Supervisory Committee
RICHARD M. HAWKS, JR. Senior Vice President None
Canandaigua, NY and Trust Officer
DAVID R. MORROW Senior Vice President None
Canandaigua, NY
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The Collective Trust, or The Canandaigua National Bank and Trust
Company, 72 South Main Street, Canandaigua, New York 14424 on the
Collective Trust's behalf, will maintain physical possession of each
account, book or other document of the Collective Trust.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 and by authorization of a power of attorney
filed with the Securities and Exchange Commission, the Registrant certifies
that it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereto duly authorized as attorney-in-fact for the
officers and members of the Supervisory Committee of the Registrant, in
Canandaigua, New York on the 29th day of April, 1997.
CANANDAIGUA NATIONAL
COLLECTIVE INVESTMENT FUND
FOR QUALIFIED TRUSTS
By: /s/ Robert J. Swartout
_______________________________________
Robert J. Swartout, Secretary of the
Supervisory
Committee and as attorney-in-fact for Robert J.
Craugh, Chairman of the Supervisory Committee,
Gregory S. MacKay, Treasurer and member of the
Supervisory Committee, and Robert N. Coe and
Donald C. Greenhouse, members of the
Supervisory Committee.
G:\UKC\CANNATBK\GENSEC\N-1A\N1APEA5.REG
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
<S> <C>
99.B1* Declaration of Trust Dated September 9, 1992
99.B2* Rules and Procedures of the Supervisory Committee
99.B3 None
99.B4 None
99.B5* Investment Management Agreement Dated October 6, 1992 between
the Registrant and The Canandaigua National Bank and Trust
Company
99.B6 None
99.B7 None
99.B8 (See Investment Management Agreement, Exhibit No. 5)
99.B9 None
99.B10* Opinion of Underberg & Kessler
99.B11.1** Consent of Morga Jones & Hufsmith, P.C.
99.B11.2* Consent of Underberg & Kessler (Included in Exhibit No. 10)
99.B12 None
99.B13* Agreements with initial Participating Trusts
99.B14.1** The Canandaigua National Bank and Trust Company's IRA Trust
Agreement Disclosure Statement
99.B14.2 None
99.B15 None
99.B16 None
27** Financial Data Schedule (filed only with EDGAR submission per
Reg. S-K, rule 601(c)(1)(v)
__________________________
* Previously filed
** Filed herewith
</TABLE>
Exhibit 11.1
INDEPENDENT AUDITORS' CONSENT
The Canandaigua National Collective Investment Fund for Qualified Trusts
As independent public accountants, we hereby consent to the use of our report
and all references to our Firm included in or made a part of this Form N-1A
Registration Statement Post-Effective Amendment No. 5 of the Canandaigua
National Collective Investment Fund for Qualified Trusts.
/s/ Morga Jones & Hufsmith, P.C.
Canandaigua, New York
April 28, 1997
DISCLOSURE STATEMENT FOR
THE CANANDAIGUA NATIONAL BANK AND TRUST COMPANY
INDIVIDUAL RETIREMENT ACCOUNT TRUST AGREEMENT
TABLE OF CONTENTS
ITEM NO. PAGE
Preamble 1
1. Your Right to Cancel 1
2. Contributions 2
3. Spousal IRA 3
4. Penalty for Excess Contributions 3
5. Rollovers 3
6. Inherited IRAs 4
7. Withdrawal Restrictions 4
8. Prohibited Transactions 4
9. Distributions During Your Life 4
10. Distributions On and After Your Death 5
11. Distributions After Age 70 1/2 5
12. Estate and Gift Tax Exemptions 6
13. Custodian Fees and Charges; Commissions;
Deposits with Bank and Mutual Funds for
which Bank is Advisor 6
14. Federal Income Tax Withholding and
Filing Requirements 7
15. Form Approval by IRS 7
16. Questions About Your IRA 7
17. Investments and Holding of Contributions 7
18. Financial Information 7
______________________
PREAMBLE
This Disclosure Statement explains the rules governing your Individual
Retirement Account (the "Canandaigua National IRA" or "your IRA") naming
The Canandaigua National Bank and Trust Company (the "Bank") as Trustee.
Item 1. YOUR RIGHT TO CANCEL
If you have received this Disclosure Statement within seven days of
opening your IRA, you have seven days to cancel and get back the full
amount paid for your IRA by mailing or delivering a written request to
cancel no later than the seventh day after opening to:
The Canandaigua National Bank and Trust Company
72 South Main Street
Canandaigua, New York 14424
Attn: IRA Administrator
After seven days following receipt of this Disclosure Statement, you
cannot cancel. The Disclosure Statement is deemed to be received as of the
date of your check or transfer instructions. The notice will be considered
mailed on the date of the postmark (or, if sent by certified or registered
mail, the date of certification or registration) if properly addressed and
mailed in the U.S., first class postage prepaid.
Item 2. CONTRIBUTIONS
You can contribute in any tax year before the year in which you reach
age 70 1/2 up to the lesser of $2,000 in cash (except for rollovers) or
100% of your compensation. Contributions made for a taxable year must be
made no later than the due date for filing your Federal income tax return
(not including extensions). Compensation includes amounts received as
payment for personal services and alimony or separate maintenance payments,
but excludes interest, dividends, other earnings from property or other
amounts not included in your gross income. The funds in your IRA are
always yours; they are not subject to forfeiture other than penalties
required or permitted by law. IRA earnings generally are not taxable until
distribution begins.
DEDUCTIBLE CONTRIBUTIONS. Contributions made for the tax year are
fully deductible if neither you nor your spouse (if married) is an active
participant in a pension, profit sharing or stock bonus plan under section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), an
annuity plan under section 403(a) of the Code, an annuity contract or plan
under section 403(b) of the Code, a simplified employee pension plan under
Section 408(k) of the Code ("SEP-IRA"), or a trust under section 401(c)(18)
of the Code. Active participant status can be determined if you refer to
your or your spouse's year-end "Wage and Tax Statement," IRS Form W-2.
If considered an active participant, the deduction for your IRA
contribution is reduced if (a) you are single and your adjusted gross
income ("AGI") exceeds the threshold level of $25,000, (b) you are married
filing a joint return and your and your spouse's AGI exceeds the threshold
level of $40,000, or (c) you are married filing a separate return and your
AGI exceeds the threshold level of $0. The deductible amount of your IRA
contributions is reduced by an amount that bears the same ratio to the
regular limit as your AGI in excess of the threshold level bears to
$10,000. When AGI levels reach $35,000 (if single), $50,000 (if married
filing joint return), and $10,000 (if married filing separate return), no
deduction is allowed.
Until the deductible amount equals zero, as determined above, the
amount you can contribute and deduct will not be lower than $200.
NONDEDUCTIBLE CONTRIBUTIONS. You may make nondeductible IRA
contributions not to exceed the lesser of $2,000 ($4,000 for Spousal IRA)
or 100% of your compensation, minus the amount of any allowable deductible
contribution. Earnings on nondeductible contributions generally are tax
deferred until distributed to you.
You must indicate on your tax return the extent to which your IRA
contributions are nondeductible. If you overstate the amount of your
nondeductible contributions, a penalty of $100 will be assessed unless it
was due to reasonable cause.
Item 3. SPOUSAL IRAS
If you file a joint return and have not reached age 70 1/2, you can
set up two accounts--one IRA for yourself and one for your spouse ("Spousal
IRA"). Effective January 1, 1997, up to $4,000.00 can be contributed
between a wage earner's IRA and his or her non-wage earning spouse's IRA
(vs. the $2,250 limit under previous law). If the eligibility rules of
Code Section 219 (c)(1) are met, spousal contributions made for tax year
1997 and following years are limited to the lesser of $2,000.00 or a
couple's combined earned income, less the amount contributed for the
compensated spouse.
Item 4. PENALTY FOR EXCESS CONTRIBUTIONS
Excess contributions are nondeductible and are subject to an annual
nondeductible excise tax of 6% of the excess for each year the excess is
not withdrawn or eliminated. The tax is paid by the person for whose
benefit the IRA was opened. If no deduction is taken for the excess
contribution and the excess plus the net earnings on the excess are
withdrawn on or before the due date (including extensions) for filing the
Federal tax return for the contribution year, the 6% excise tax will not
apply; but the earnings on the excess will be includable in your gross
income and the 10% tax on premature distributions will be applied to such
earnings, unless you are age 59 1/2 or disabled. If the excess
contribution is withdrawn after such time, the excess will be subject to
the 6% excise tax and will be includable in your gross income and subject
to the 10% tax on premature distributions (if applicable). The 6% excise
tax will be imposed each year until the excess is withdrawn or eliminated.
Instead of withdrawing the excess contribution, it may be eliminated by
making reduced contributions in later years. The 6% excise tax will apply
until the excess is eliminated in a later year in which the maximum
contribution has not been made. You may withdraw tax-free and without
penalty any excess rollover contribution if it occurred because you
reasonably relied on erroneous information required to be supplied by the
entity making the distribution that was rolled over. If your IRA is
invested in a time deposit, a withdrawal (including a withdrawal of any
excess contributions) may be subject to early withdrawal penalties in
addition to tax penalties.
Item 5. ROLLOVERS
All or a portion of certain distributions from your or your deceased
spouse's qualified retirement plan, annuity, or another IRA may be rolled
over into an IRA tax-free within 60 days after receipt. Rollover
contributions to your IRA are not deductible. Accumulated voluntary
deductible contributions to a qualified retirement plan or government plan
may be eligible for rollover treatment when distributed. Rollovers from an
employer's qualified plan to your Qualified Plan Rollover IRA may be rolled
over to another qualified retirement plan only if funds from other sources
were not contributed to such IRA and no part is attributable to
contributions made for you as a self-employed individual to a self-employed
(HR-10 or Keogh) retirement plan. A qualified partial distribution from a
qualified retirement plan (i.e., at least 50% of the balance to your credit
is distributed upon termination of employment) may be rolled over to your
IRA, but is limited to the portion which would have been includable in
gross income. A rollover distribution from an IRA may be made only once
per year. There is no limit on direct transfers of IRA assets from one IRA
custodian or trustee to another.
Item 6. INHERITED IRAS
An inherited IRA is an IRA which is acquired by a Beneficiary who is
not your spouse on your death. Such a Beneficiary cannot make cash or
rollover contributions to that IRA or treat it as his or her own.
Item 7. WITHDRAWAL RESTRICTIONS
A taxable distribution before age 59 1/2 will be included in your
gross income and will be subject to a nondeductible 10% tax penalty, any
early withdrawal penalties on time deposits, and other penalties required
or permitted by law. There is no 10% tax penalty for distributions made
because of death, permanent disability, rollovers or timely removal of an
excess contribution, or for distributions made in the form of substantially
equal periodic payments over your life expectancy (or the joint life
expectancies of you and your Beneficiary).
Item 8. PROHIBITED TRANSACTIONS
If you engage in a "prohibited transaction," as defined in section
4975 of the Code, the IRA loses its tax exemption and the total value of
your IRA must be included in your gross income. If you pledge any portion
of your IRA as security for a loan, the amount pledged must be included in
your gross income. Prior to disability or age 59 1/2, the additional 10%
penalty tax on premature distributions will be imposed on amounts included
in your gross income by reason of a prohibited transaction. The same rules
apply to a spouse's use of his or her Spousal IRA.
Item 9. DISTRIBUTIONS DURING YOUR LIFE
No tax penalty is imposed on distributions from your IRA after you
reach age 59 1/2 or become permanently disabled. Distributions must begin
no later than the first day of April following the calendar year in which
you reach age 70 1/2. Generally, the law permits you to receive your IRA
in a lump sum or installments over a period not exceeding beyond your life
expectancy or the joint life and last survivor expectancy of you and your
Beneficiary. Life expectancies are determined in accordance with the IRS
tables. Your life expectancy can be recalculated no more frequently than
annually, but the life expectancy of a non-spousal Beneficiary cannot be
recalculated. All distributions are taxed at ordinary income tax rates and
are not eligible for capital gains treatment or five-year averaging.
When requesting a distribution, you must specify the reason for the
distribution. Examples are: premature distributions (i.e., distributions
before age 59 1/2), rollovers, disability, death, normal (at or after age
59 1/2), excess contribution returns and other.
Item 10. DISTRIBUTIONS ON AND AFTER YOUR DEATH
If you die after distribution to you has started, your designated
Beneficiary must receive the balance of your IRA at least as rapidly as
under your method of distribution. If you die before distribution to you
has started, distribution must be made to your Beneficiary in one of the
following ways:
(i) within five years after death (if a distribution option is
not selected, this option will apply);
(ii) in substantially equal installments over a set period not
extending beyond his or her life expectancy beginning no later than
one year after the date of your death;
(iii) in the case of a spousal Beneficiary who so elects within
the five-year period following your death, installment payments over a
set period not extending beyond his or her life expectancy commencing
at any date prior to the date on which you would have reached age 70
1/2; or
(iv) unless you direct the Bank otherwise in writing, and if
your spouse is your Beneficiary, then notwithstanding the foregoing,
he or she may elect to treat the account as his or her own IRA in
which case the normal IRA distribution rules will apply.
Election (iv) is considered to have been made if your spouse makes a
regular IRA contribution to this IRA, makes a rollover to or from this IRA
or fails to elect any of the above distribution provisions. Payments will
be calculated by the use of the IRS tables. The life expectancy of the
surviving spouse may be recalculated annually. A non-spousal Beneficiary's
life expectancy is calculated at the time payments first commence and
payments for any 12-consecutive month period thereafter will be based on
that life expectancy. You may designate a change of Beneficiary on a form
provided by the Bank. The change will not be effective unless the Bank
receives a properly completed form prior to your death. If after your
death your designated Beneficiary is receiving (or entitled to receive)
payments over a set period, he or she may designate a Beneficiary to
receive the balance of the IRA (if any) on his or her death in accordance
with the above rules. A written authorization filed with the Bank (which
can be on your Beneficiary designation form) permits a designated
Beneficiary receiving installment payments, from time to time, to choose to
increase the frequency or amount of payments and/or withdraw all or any
portion of the IRA.
Item 11. DISTRIBUTIONS AFTER AGE 70 1/2
MINIMUM DISTRIBUTION REQUIREMENTS. If the amount distributed to you
for any tax year after you reach age 70 1/2 is less than the minimum amount
required by law, the IRS may impose a penalty tax equal to 50% of any such
deficiency unless it is satisfied that reasonable steps are being taken to
remedy the deficiency. The amount required to be distributed in any year
is generally based on your life expectancy or the joint life expectancies
of you and your designated Beneficiary. However, if your Beneficiary is
not your spouse, the law imposes an additional requirement which is called
the minimum distribution incidental benefit requirement. In general, this
requirement is designed to prevent you from naming a Beneficiary who is
much younger than yourself in order to extend your payout period. You may
wish to consult your tax advisor to determine your minimum distribution.
These rules on distribution apply equally to Spousal IRAs.
DISTRIBUTION OF NONDEDUCTIBLE CONTRIBUTIONS. Withdrawals which
include nondeductible contributions will be treated as part taxable and
part nontaxable. The amount considered nontaxable is the portion which
bears the same ratio to the total distribution that your aggregate
nondeductible contributions bear to your account balance at the end of the
year for all of your IRAs, plus adding back any distributions for the year.
The 10% tax penalty on distributions prior to age 59 1/2 will apply for the
taxable portion of the distribution.
PENALTY FOR EXCESS DISTRIBUTIONS. A 15% tax penalty is imposed on the
sum of all annual distributions received during the calendar year in excess
of $155,000 (Code Section 4980A). The 15% excess distribution tax will be
suspended for distributions received in 1997, 1998, and 1999. Please
consult your tax advisor for more complete information, including the
availability of favorable elections. The excess distribution penalty will
not apply to a distribution of nondeductible contributions, or a
distribution to an alternate payee under a qualified domestic relations
order.
Item 12. ESTATE AND GIFT TAX EXEMPTIONS
Generally, your IRA will be included in your estate for Federal estate
tax purposes. Your IRA may qualify for a deduction for purposes of that
tax if the Beneficiary is your spouse. Designation of a Beneficiary to
receive your IRA on your death is not treated as a gift subject to the
Federal gift tax.
Item 13. CUSTODIAN FEES AND CHARGES; COMMISSIONS; DEPOSITS WITH BANK
AND MUTUAL FUNDS FOR WHICH BANK IS ADVISOR
The Bank will receive a fee in accordance with its fee schedule in
effect from time to time for IRA trusts and shall be reimbursed for its
reasonable expenses. The Bank will give you 30 days notice of any change
in its fee schedule. The Bank may also charge against your account any
taxes assessed on it, administrative expenses incurred by the Bank
(including legal fees), and penalties required or permitted by law
(including penalties for early withdrawals of time deposits). In the case
of mutual funds that charge a sales commission on the purchase of their
shares, a sales commission will also be charged against each investment in
such funds as described in the applicable mutual fund prospectuses.
In accordance with your Canandaigua National IRA contract with the
Bank, you may elect among a number of investment options, including the
deposit of funds in bank deposits with the Bank and the investment of funds
in mutual funds for which the Bank is investment advisor. Such deposits
and investments are specifically authorized in the Canandaigua National IRA
contract with the Bank. You have received a prospectus describing the
mutual fund or funds for which the Bank is investment advisor, in which the
fees paid by such mutual funds or funds to the Bank for advisory and
related services is set forth.
Item 14. FEDERAL INCOME TAX WITHHOLDING AND FILING REQUIREMENTS
Distributions from your IRA are subject to Federal income tax
withholding unless you (or your Beneficiary) elect not to have withholding
apply. The current withholding rate set by law is 10%. When you want to
receive a distribution from your IRA, contact the Bank, which will supply
you with additional information and election forms. Form 5329 must be
filed with the IRS for each tax year in which you owe tax penalties, such
as taxes on excess contributions, early distributions, or under-
distributions after age 70 1/2.
Item 15. FORM APPROVAL BY IRS
A form of your Bank IRA has been approved by the IRS.
Item 16. QUESTIONS ABOUT YOUR IRA
You can obtain further information about IRAs from any IRS district
office.
Item 17. INVESTMENTS AND HOLDING OF CONTRIBUTIONS
Contributions to your IRA and any earnings on such contributions are
invested in shares of mutual funds and/or such other deposits and
investments as you may select. Your IRA assets are held in those
investments exclusively for your benefit and the benefit of such
Beneficiaries as you may designate in writing delivered to the Bank. Your
right to the entire balance in your IRA is nonforfeitable. No part of your
IRA assets may be invested in life insurance contracts or in collectibles
such as works of art, antiques or stamps; however, investments in gold and
silver coins issued by the United States are permitted.
Item 18. FINANCIAL INFORMATION
Due to the nature of the investments in this account, no projection of
the growth or future value of the account can reasonably be shown. The
value of the account will depend upon the performance of any investments
that are chosen.
G:\UKC\CANNATBK\INVESTMA\TYCNB.MEM
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